In addition to coping with the ongoing impacts of coronavirus, the transport and logistics sector must also prepare for the UK’s emergence from the transition agreement with the European Union on 1 January 2021. This is the moment that Brexit becomes a practical reality with consequences that will depend on what sort of deal the UK is able to agree with the EU on our ongoing relationship.
While negotiations are ongoing, the Government has now begun to issue guidance on the new arrangements. It has issued the Border Operating Model guide, aimed at businesses that import from or export to the UK, covering regulatory changes to customs procedures and a range of other elements of trade with the EU. Businesses will need to read this guide alongside other publications, such as the new UK tariff guide and more detailed guidance on how to complete customs declarations. Some key points include:
- the importance of completing accurate customs entries and the correct supporting documentation
- the important role that logistics and customs agents will play in helping businesses complete the documentation
- details of the three-stage approach to the implementation of border regulations for imports from the EU
- how businesses should prepare for importing and exporting
- new regulatory procedures including Economic Operators Registration and Identification numbers (EORI), health and safety checks for certain products, details of the new Goods Vehicle Movement System (GVMS), and of the SmartFreight System for businesses using Ro-Ro (roll-on, roll-off) services.
Industry trade bodies have welcomed the guide, which is available in full here. The Government has also published more detailed guides to importing and exporting for businesses selling or buying goods across the border with the EU. The exporter guide is available here and the importer guide is here.
The Government has also announced details of a new VAT model for goods arriving into the UK from EU and non-EU countries. The aim is to make sure these goods are treated in the same way so that UK businesses are not expected to compete with VAT-free imports.
The model will also improve the effectiveness of VAT collection on imported goods and address the problem of overseas sellers failing to pay the right amount of VAT on sales of goods already in the UK at the point of sale. The new model is scheduled to be up and running by 1 January. For more details, see here.
Funding support for Brexit preparations
The Government has announced a series of funding packages to prepare for post-Brexit changes. These include £750m for the development of new border infrastructure, support for recruitment and the implementation of new technologies to make sure UK border systems are fully operational next year.
This package includes £450m to support the development of infrastructure in ports and in-land, in order to increase capacity at key UK transit points. Port operators will be able to apply for support as they work to get the right infrastructure in place.
A further £250m is available for investment in staff and new IT platforms, including £10m for 500 Border Force personnel that the Government thinks will be needed to administer the new customs procedures, and £20m for new IT equipment. Some £100m will make sure HM Revenue & Customs (HMRC) can develop its systems to reduce the burden in business. Cash will also be allocated to new technologies to make sure new controls can be fully implemented in Ro-Ro (roll-on, roll-off) services, and to support new data infrastructure aimed at enhancing border management and flows.
This support is in addition to some £84m for UK businesses to support the training of 50,000 new customs agents to manage the increased volume of customs declarations.
The Government has also allocated £25m to help companies with trade between the Great Britain and Northern Ireland. From 1 January 2021 Northern Ireland will remain in the EU single market for goods, so special arrangements will apply. HMRC is considering how to support businesses with specialist training on this issue. It also plans to introduce a new system enabling businesses to make electronic declarations and has already offered briefings on how the system will be used to manage trade between the Great Britain and Northern Ireland.
Improving key transit points
Amid concerns about the potential for delays at key transit points to and from the EU, the Department for Transport (DfT) is to buy a site near Ashford in Kent that will partly be used as a lorry park to minimise disruption at the Port of Dover and the Channel Tunnel. The facility will be able to check more than 10,000 vehicles a day, but will need to be made ready for the end of the year.
The DfT has also approved the development of Manston Airport in Kent. While the initial plan was to use the airport runway for lorry parking, the intention now is to develop the facility as a dedicated air freight facility. It will have the capacity to manage at least 10,000 cargo movements a year, alongside passenger services and aircraft engineering.
Meanwhile, the Government says it’s exploring the possibility of establishing ten ‘freeports’ across the UK as part of plans to unlock international trade. A freeport is an area classed as sitting outside the country for customs purposes, which means goods can pass in and out of the facility with no tariffs to pay; duties will still be payable once goods are exported. Several ports and airports have expressed interest in the idea, which is now subject to a public consultation.
In practice, however, while the freeports initiative does have potential to boost trade, and has been cautiously welcomed by some, key uncertainties still need to be addressed. The Freight Transport Association has expressed support in principle but wants more detail. Other industry bodies are worried jobs may be displaced from other regions of the UK as freeports attract investment in high value manufacturing and innovation to nearby hubs.
Finally on Brexit, our latest Views from the Industry webinar focused on the ongoing negotiations between the UK and the EU, as well as potential opportunities and challenges for businesses. The webinar featured commentary from former Brexit Minister, Lord Bridges, and Financial Times journalist, Peter Foster. You can listen here.
Cargo rates fall
On coronavirus impacts, it’s worth noting that container rates on shipping routes between Asia and Europe have fallen over the past week. Lines have reduced rates to attract more cargo. French container transportation and shipping company, CMA CGM, for example, has reduced its peak season surcharge from $200 to $150 on Asia to Northern Europe. Other carriers are expected to follow suit in the coming weeks.
In the air cargo sector, airlines are slowly reactivating scheduled services. OAG, the air travel intelligence company, says the number of services increased again last week, though they still stand at only 45% of capacity in the same week a year ago. With flights increasing and demand for goods, such as protective personal equipment falling, air freight rates continue to ease from the peaks seen in April and May. This is good news for those businesses dependent on this type of transport.
How Santander can help
All of the issues covered in this week’s update have the potential to impact our clients’ international supply chains. We work with a number of logistics partners with specialisations in particular markets or sectors. We’re especially keen to hear from any clients facing supply chain difficulties. Our partners are happy to provide impartial advice on a range of potential solutions that might help you overcome such challenges.