UK shipping could face further Brexit disruption on January 1
[By Karen Jackson]
Take a look at the headlines and you might be forgiven for wondering if the UK has changed a year. Debate rages on how tight the restrictions are to tackle the latest wave of COVID, as the UK’s withdrawal from the EU is far from over. Brexit Minister Lord Frost has just resigned and on January 1 will once again see a set of Brexit changes that appear likely to exacerbate the economic damage from the pandemic. So what are the changes for January and why have we heard so little about them?
Full customs checks will take effect on January 1. One aspect of the changes concerns the new rules that must be followed to allow trade between the UK and the EU to remain duty-free, in accordance with the Trade and Cooperation Agreement.
In 2021, exporters were allowed to provide proof of origin of goods after export, provided they make a customs declaration at the border. But from January 1, when UK exporters cannot prove the origin of a product to customs, the EU customer will have to pay the full import tariff (and vice versa). For example, a French importer bringing agricultural products from the UK would incur an average non-preferential tariff of around 11%.
Importers have been much less affected by Brexit than exporters so far, not even having to make customs declarations. This was part of an arrangement called “phased customs checks”, but from January 1 they will also have to make customs declarations.
This means that on top of all the supply chain problems that manufacturers have endured in recent months, they will now face the double whammy of full customs controls for the first time. If companies do not meet the new requirements, goods will not be able to leave the port.
The transition period is not over on January 1 either. Throughout the remainder of 2022, we expect to see a series of other safety and security measures introduced. For example, physical checks on live animals will begin on July 1. This, too, will put more pressure on border controls and further slow the movement of trade from side to side.
Lack of clarity
The basis for all of these changes is outlined in the UK government’s guidance document The Border Operating Model. An updated version was released in November, with further revisions released no later than December 16. These changes reflect the new timetable for the implementation of import controls, which was not defined until September. You’ve probably heard of just-in-time manufacturing, but it’s the equivalent of policymaking. It has left businesses in considerable uncertainty.
The UK government maintains that this is simply a “pragmatic new timetable”, but it raises concerns about the different levels of compliance in both directions. For example, delaying the implementation of controls entering the UK may result in goods crossing the border that do not meet appropriate health and safety standards, while these checks are carried out for UK goods exported to the EU.
Even before all these additional new Brexit rules come into effect in January, UK ports are expected to experience the lowest trade volumes since 1983 in 2021. It doesn’t help that Felixstowe, Britain’s largest port , appears to be one of the least efficient ports both in the UK and compared to their competitors in Europe and Asia. It does, whether you measure efficiency in minutes per container transported or the average number of hours ships spent in port.
The UK government is trying to tackle these kinds of challenges with its Â£ 200million Port Infrastructure Fund, but this too has been controversial. The Port of Dover sued the government after it received only around 10% of the requested funding to build additional passport checkpoints.
Government funds were reduced by the fact that the total bids it received from ports was more than double what it made available, so no port got everything the funding he was asking for. As if that weren’t enough, the government then reduced the total prize pool size by 34%. If UK ports are unable to modernize properly and then come under additional pressure from the changes introduced in January, all of this means that delays in shipments are likely to be an ongoing problem.
In other words, not only are businesses facing a major adjustment in the way they handle customs clearance, goods are likely to end up waiting longer in UK ports, further increasing costs for businesses. because time is money. This increases the likelihood that supply chains will shift away from UK companies to other partners.
UK businesses have already had to contend with declining trade in the wake 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 remaining Minister of Foreign Affairs. For a government that was elected on the motto of ‘getting Brexit done’, it may not be all that surprising that so little has been said about the changes to come.
Karen Jackson is an economics lecturer at the University of Westminster.
This article is courtesy of The Conversation and can be found in its original form here.
The opinions expressed here are those of the author and not necessarily those of The Maritime Executive.