Take a look at the headlines and you may be forgiven for wondering if the UK has moved on a year. A debate has sparked over how tough the restrictions should be to combat the latest wave of COVID, while the UK’s withdrawal from the EU is far from over. Brexit Minister Lord Frost has just resigned, and a series of Brexit changes will take effect on January 1 that appear to exacerbate the economic damage from the pandemic. So what are the January changes and why have we heard so little about them?
Full customs controls will take effect on January 1. One aspect of the changes is the new rules that must be followed to allow trade between the UK and the EU to remain duty free, according to the Trade and cooperation agreement.
During 2021, exporters have been allowed to provide proof of origin of goods after they have been exported, provided they have made a customs declaration at the border. But as of January 1, when UK exporters cannot prove the origin of a product at customs, the EU customer will have to pay the full amount. import tariff (and vice versa). For example, a French importer bringing in agricultural products from the United Kingdom would incur an average non-preferential tariff of about 11%.
Importers have been affected by Brexit much less than exporters so far, without even having to make customs declarations. This was part of an arrangement called “tiered customs checks,” but as of January 1, they will also have to make customs declarations.
This means that, in addition to all the supply chain problems manufacturers have been enduring in recent months, they will now face the double whammy of comprehensive customs controls for the first time. If companies do not comply with the new requirements, the goods will not be able to leave the port.
The transition period was also not completed on January 1. During the remainder of 2022, we expect to see a variety of other safety and security measures introduced. For example, physical checks on live animals will begin on July 1. This will also put more pressure on border controls and further slow the movement of trade from one side to the other.
Lack of clarity
The basis for all these changes is outlined in the UK government policy document. The border operating model. An updated version was released in November, with new revisions issued on December 16. These changes reflect the new timetable for the implementation of import controls, which was only established in September. You’ve probably heard of just-in-time manufacturing, but this is the equivalent in policy making. It has left companies with considerable uncertainty.
The British government maintains that this is simply a “new pragmatic timetable”, but raises concerns about different levels of compliance in either direction. For example, delaying the implementation of controls entering the UK may result in goods crossing the border and failing to meet proper health and safety standards, whereas these verifications are carried out for exported UK goods. to the EU.
Even before all these additional new Brexit rules go into effect in January, UK ports in 2021 appear to have experienced the lower volumes trade since 1983. It doesn’t help that Felixstowe, Britain’s largest port, appears to be one of the less efficient ports both in the UK and compared to rivals in Europe and Asia. This is the case whether you measure efficiency as minutes per container movement or the average number of hours ships spent in port.
The UK government is trying to tackle these kinds of challenges with its £ 200 million Port Infrastructure Fund, but this has also been controversial. The Port of Dover took the government to court when only received about 10% of the funds he requested to build additional passport checkpoints.
Government funds were squeezed due to the fact that the total of offers it received from the ports amounted to more than double what it had made available, so that no port obtained all the financing it requested. As if that wasn’t bad enough, the government then reduced the total pot size by 34%. If UK ports cannot be properly updated and then come under additional pressure due to changes to be introduced in January, it all implies that shipping delays are likely to be an ongoing problem.
In other words, not only are companies facing a major adjustment in the way they handle customs clearance, but goods are likely to end up waiting longer in UK ports, further increasing costs for freight forwarders. companies because time is money. The possibility of supply chains diverting away from UK companies to other partners is increasing.
UK companies have already had to cope declining trade as a result of Brexit. And don’t forget that all of this is happening in a context of transition to Liz Truss becoming the new Brexit minister, while she remains as Foreign Secretary. For a government that was elected with the slogan of “getting Brexit,” it is perhaps not so surprising that so little has been said about the upcoming changes.