What does the UK Government’s ‘Brexit Reset Deal’ really deliver to those wanting to ship to the EU?

The UK's departure from the EU has introduced significant complexities for customs in freight trading with the EU. The recent ‘Brexit Reset Deal’ aims to alleviate some of these issues, but fundamental challenges remain due to the UK's decision not to join the EU's customs union.

Issues UK Traders have Faced in Sending Freight Goods into the EU Since Brexit:

Since the enforcement of Brexit rules, UK traders have encountered a range of issues when sending freight goods to the EU, primarily stemming from the UK's departure from the EU's single market and customs union:

• Increased Paperwork and Administrative Burden:
  • Customs Declarations: Every shipment now requires detailed customs documentation, including commercial invoices and declarations, which were not needed before. This has led to a significant increase in "red tape."
  • EORI Numbers: Businesses need an Economic Operator Registration and Identification (EORI) number for cross-border trade.
  • Proof of Origin: To benefit from tariff-free trade under the Trade and Cooperation Agreement (TCA), businesses must prove the origin of their goods, which can be complex and requires ensuring a minimum percentage of EU or UK-produced components.
  • Inconsistent Interpretation of Rules: Different EU countries may interpret and apply customs rules inconsistently, creating additional complexity and frustration for UK exporters.
• Tariffs and Duties:
  • While the TCA eliminated tariffs on most goods, goods that do not meet the "rules of origin" are subject to tariffs, increasing costs and impacting competitiveness.
  • VAT charges and handling fees also apply, further increasing shipping costs.
• Border Delays and Congestion:
  • The introduction of a hard border and new border controls has led to increased checks on goods and vehicles, resulting in delays and congestion at ports and borders.
  • This has been particularly evident with issues like incorrect or missing paperwork.
• Increased Shipping Costs:
  • The additional administrative requirements, tariffs, and delays have collectively increased the cost of transportation for road freight operators.
  • Some EU hauliers are reluctant to take return loads from the UK due to the increased complexity, leading to higher freight rates for UK exports.
• Supply Chain Disruptions:
  • Changes in supply chain operations have been necessary as companies adjust to the new customs requirements.
  • Sectors dealing with perishable goods, such as agri-food, have been particularly hard hit by regulatory hurdles and delays.
• Labour Shortages:
  • The end of free movement for EU workers has contributed to a shortage of HGV drivers and other logistics staff in the UK, exacerbating delays and bottlenecks.

What the Latest ‘Brexit Reset Deal’ Does to Alleviate Issues:

The recent ‘Brexit Reset Deal’ primarily focuses on simplifying trade in specific areas and aims to improve the overall relationship:

• Sanitary and Phytosanitary (SPS) Agreement (Agri-food): This is a key component. The deal aims to:
  • Reduce Red Tape: Significantly cut down on the paperwork and routine checks for animal and plant products moving between the UK and the EU, including between Great Britain and Northern Ireland.
  • Allow Re-entry of Certain Products: Enable the sale of some British food products, like burgers and sausages, back into the EU that were previously restricted.
  • Dynamic Alignment: In return for these simplifications, the UK will need to follow EU food standards, a system known as ‘dynamic alignment,’ and accept the European Court of Justice's oversight in this area. This is a significant concession for some Brexiteers.
• Emissions Trading Systems (ETS) Linkage: The deal seeks closer cooperation on emissions by linking the UK and EU's respective ETS. This aims to:
  • Avoid Carbon Tax: Prevent UK businesses from being hit by the EU's carbon border adjustment mechanism (CBAM), which is due to come into force.
  • Improve Energy Security: Contribute to better energy security for the UK.
• Steel Exports: A bespoke arrangement aims to protect British steel exports from new EU rules and tariffs, saving the UK steel industry significant costs.
• Travel and Mobility (Indirect Customs Impact): While not directly customs for freight, the deal aims to ease travel, which can indirectly impact freight efficiency:
  • E-gates: British travellers may be able to use more e-gates in EU airports, reducing queues.
  • Pet Passports: Reintroduction of pet passports will eliminate the need for animal health certificates for every trip, simplifying pet movement.
  • Youth Mobility Scheme: Further cooperation on a youth experience scheme could facilitate movement for young people, potentially easing some labour issues in the long term.
• Fishing Rights: The deal extends EU access to British waters for an additional 12 years, a politically sensitive agreement that may be seen as a concession by some.

Remaining Issues as a Result of the UK Not Joining the Customs Union:

Despite the ‘Brexit Reset Deal,’ significant issues remain as a fundamental consequence of the UK's decision not to rejoin the EU customs union:

• Continued Customs Declarations and Checks: Even with simplifications, the core requirement for customs declarations on goods moving between the UK and EU remains. The customs union eliminates the need for such declarations between members.
• Rules of Origin (RoO): The complex and often onerous rules of origin requirements will persist. While the SPS agreement helps agri-food, for many other goods, businesses will still need to prove origin to avoid tariffs.
• No Common External Tariff: As the UK is not part of the EU's customs union, it maintains its own independent trade policy and external tariffs. This means:
  • Tariff Barriers Remain: Goods not meeting RoO will continue to be subject to tariffs.
  • No Seamless Movement: There is no common external tariff, meaning goods cannot move freely across the UK-EU border without customs intervention, unlike within a customs union where goods imported into one member can circulate freely.
• No Participation in EU Trade Deals: The UK cannot benefit from the EU's extensive network of free trade agreements as a member of its customs union would. The UK must negotiate its own trade deals, which may offer different levels of access and benefits.
• Regulatory Divergence (Broader): While the SPS agreement introduces "dynamic alignment" for agri-food, the UK generally retains the ability to diverge from EU regulations outside of this specific area. This ongoing potential for divergence means businesses may still face challenges in meeting differing product standards and regulations, even without tariffs.
• Border Infrastructure and Costs: The need for physical border checks and associated infrastructure (e.g., Border Control Posts) will largely remain, even if some routine checks are removed for specific products. This continues to add costs and potential delays.
• VAT Complexity: Unless the UK rejoins the EU VAT system (which is separate from the customs union), VAT will still need to be paid on imports into both the UK and the EU, potentially leading to double taxation or complex accounting for businesses.

In essence, while the ‘Brexit Reset Deal’ addresses specific friction points, particularly in the agri-food sector, it does not fundamentally alter the underlying customs landscape created by the UK's departure from the EU's customs union. The requirement for border checks, customs declarations, and rules of origin for a vast array of goods will continue to be a feature of UK-EU trade, making it inherently more complex than it was prior to Brexit.