The trade agreement between the EU and the UK is intended to regulate the most difficult hurdles for trade after Brexit. Transitional phases are intended to get trading partners used to the new situations one by one. However, importing and exporting companies are already overwhelmed - which has far-reaching consequences.
Long traffic jams are lining up at the border points. Even though the current traffic volume is lower than usual. According to a statement by the Road Haulage Association, only around 2,000 trucks cross the canal every day, compared with up to 6,000 trucks per day in previous years. The low traffic volume could currently relate to the fact that many companies have restocked their warehouses before the transition period expires on Dec. 31, 2020. But even inventories run out at some point.
Supply shortages due to confusing regulations
At the same time, many suppliers from the EU are hesitant to export. The new transport regulations are confusing, customs clearance is time-consuming and the paperwork is enormous. Already, supply bottlenecks and failures are reaching the island. The risk remains that goods will be rejected at the border. According to the Road Haulage Association, around one-fifth of all trucks arriving in the UK are turned back because of missing or defective paperwork.
In order to avoid these time and financial losses, the necessary bureaucratic effort must be taken. Although the free trade agreement between the EU and the United Kingdom offers a "zero tariff". However, for this to come about, numerous export documents must be completed, stamped, recorded, processed and approved. Where a monthly INTRASTAT declaration used to suffice, individual goods now have to be classified in the customs tariff and an import and export declaration has to be completed.
No "zero tariff" without proof of origin
British Exporters are facing similar challenges. With the end of the transitional period, they will have to prove that their products were predominantly manufactured in the UK. This is the only way to benefit from the "zero tariff". This requires new supplier declarations and proofs of origin as the basis for a new preference calculation.
British goods lose preferential "EU origin"
For the supplier's customer in the EU, the new proof of origin itself means a new preference calculation. Trade agreements with other countries, such as Japan, require the goods to originate in the EU. As the UK is no longer part of the EU and input materials from the UK lose their preferential origin, the supplier's own calculation must be updated. Read more
Especially the complicated value chains in the automotive industry are affected. For companies with close trade relations to the UK, the loss of preferential "EU origin" possibly means an additional loss of customs benefits with further trading partners.
Chaos with a ray of hope
Maintained foreign trade master data, correct customs tariff numbers, complete supplier declarations and new preference calculations ensure a smooth process at the border.
For trading partners, there is no way around the trade agreement. Those who continue with business as usual will probably drive the goods home again.