Brexit will cause a remarkable shakeup within the transportation industry as freight flows, current policies, and regulations face extensive adjustments. What does the withdrawal mean for international shipping and how problematic will the new divide become?
What is Brexit?
The United Kingdom's exit from the European Union is transforming trade with the EU and other strategic partners around the globe. What does this mean for transportation and logistics providers?
The shipping landscape of Europe is about to be reshaped - altering the continent-wide flow of goods by all modes. American Shipper warns that supply chains perform best in fluid and stable environments and both are likely to be negatively impacted by Brexit.
On January 1, 2021, the transition period with the EU will end, and the UK will operate an external border as a sovereign nation. The recently released 200-page manual outlines the processes for moving goods between the UK and the EU from 2021 onwards, with additions to be introduced in April and July 2021.
Who will Brexit effect?
According to McKinsey, the EU accounts for 54% of all goods imported into the UK, making Brexit a concern for companies with British operations - and a compelling reason for industry leaders to revisit their shipping strategies.
Brexit affects three critical freight flows:
- Outbound products of UK origin destined for other EU markets and countries that have an agreement with the EU
- Cargo entering the UK from EU nations and countries that have trade agreements with the EU
- Transit flows originating in markets outside the EU that currently pass through the UK that are destined to other EU markets (and vice versa)
Shipping after Brexit?
The Brexit guidance being issued by the UK government is to get someone to deal with customs for you. It seems simple, however, officials warn that what third parties can do and who will be liable depends on the services they provide and the commercial agreement in place.
To put in perspective the procedural changes that are coming, the UK’s tax authority has estimated that, after Brexit, firms will need to file 400 million extra customs declarations annually. That puts the cost of the new customs paperwork at about 13 billion pounds a year (converted to the US dollar - that’s over $17 billion).
Additionally, The Load Star warns that if transportation and logistics providers do not follow new regulations and the government issued systems, they will face personal fines and penalties. An example of new regulations: Truckers will be required to file shipment information electronically and receive approval from the tax authorities prior to traveling towards the U.K./EU border.
What’s next? According to Logistics Manager, COVID-19 has impacted available capital and has derailed Brexit preparations, preventing businesses from investing in new customs processes or stockpiling to protect themselves against disruption to supply chains. Our experts predict that as relationships become more stabilised, new information surrounding trade agreements and tariffs will develop and be readily available, but now is the time to start having those post-Brexit conversations about how to get your shipments across borders.
Whether it’s Brexit or a global pandemic that sidelines your business strategy, DDC has the experience, business continuity and resources available to help transportation providers navigate through unanticipated circumstances from the point of origin and through customs. To learn more about how we can help with your customs brokerage processing needs, fill out this quick webform.
Here are other Brexit and international shipping resources:
- An insightful article on how Freight Forwarders Tap Customs Brokerage Services For Competitive Edge
- Expert advice on International Shipping Best Practices: Insights for Conquering the Hurdles