The current trade disruption between the UK and the EU is the result of ignoring expert advice and a chaotic information campaign. We warned about serious disruptions many months ago and advised the Government to introduce an implementation phase for businesses to cope with the new customs formalities. The Government’s chosen approach has created existential threats to many businesses on both sides that currently struggle to trade with each other. The disruptions must urgently be solved in three steps.
Step one
First, the Government must temporarily relax the requirement for EU traders to have an office in the UK to import goods, and subsequently ask the EU commission to do the same. The most serious problem today is that businesses without a presence in the other market cannot import their goods without appointing a customs agent.
This is how the new customs rules have been designed by the UK and the EU as part of the Brexit deal – this is a serious flaw. Customs agents are rare and very expensive, and the UK currently requires about 20,000 more agents to meet demand. The Government should take this step very urgently to avoid a major supply chain disaster in the weeks ahead.
Step two
Second, the Government needs to admit that their expensive Brexit information campaign has not prepared businesses well enough for the new trade relationship with the EU. The guidance provided by the Government contains conflicting information, not enough detail, and to some extent, wrong advice.
This has become particularly apparent with regards to the new border situation with Northern Ireland. It has become clear that the Government’s guidance has not been drafted by trade and customs experts, which is a serious shortcoming. The Government must take a step back now and relax the rules for the time being, while redrafting guidance and advisory papers based on the final Brexit deal arrangements. This is the only way to overcome the misinformation and provide traders and freight carriers with the confidence they need to sell cross-border.
Step three
Thirdly, there are some serious flaws in the Brexit trade deal that the Government must put high up on the agenda to clarify and potentially renegotiate with the EU.
One area that continues to create confusion among traders and their freight carriers is the new rules of origin provision. The Government presented the Brexit deal as a tariff and quota free agreement. This is only partly true. Tariffs still apply in the normal way for manufactured goods which contain more than 40 percent of ingredients with origins outside the UK or EU.
There is no guidance of how businesses should calculate and document the origin analysis. This is causing major disruptions to supply chains. Again, we recommend that the new rules of origin are temporarily paused until there is sufficient guidance and expertise available to work this out.