What you need to know about the EU-UK Trade and Cooperation Agreement

The EU-UK Trade and Cooperation Agreement (the TCA) has now been in place for a couple of weeks. Because it was ratified only five days before its implementation, it is only becoming clear how it will work now that it is in operation.  If you need to know about how it’ll work – best ask someone who’s deeply involved with it.

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Peter Younie of Cameron Peters explains all . . .

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Decisions are being made daily. For example, at the beginning of January, DHL did not know what extra charges they would levy to handle the paperwork. By Monday, they had decided. Similarly, over the next few days and weeks, more will become clear.

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So, based on what we know now, what changes do you need to be aware of? 

The answer, unless you want to handle imports yourself by buying directly from the EU supplier, is not many. Importing from, and exporting to, EU states is now the same as it has always been when trading with any other state. Note that there are always country-specific variations, even within the EU (it’s not that Single a Market).

Otherwise, the good news is that when you source EU products from UK distributors, from EU brands that have their own UK operations, or from importers such as ourselves, we do all the work for you. But there will still be additional costs and, initially, delays that you must factor in.

If you are not arranging imports yourself

Permanent additional costs and delays

  1. A new, specific additional cost. For example, DHL’s “Brexit Fee” is £0.25 per kg, with a minimum of £4.50.
  2. Customs clearance costs.
  3. Import VAT. For some items (unlikely to be lights), there can also be import duty and excise charges.
  4. Longer lead times, to allow for additional paperwork to be raised and processed.

Temporary additional costs and delays

There are temporary problems, potentially occasionally severe, with moving freight. Ridiculously high freight prices are being charged by some hauliers for shipments to UK, because of fears about disruption, of getting held up by paperwork problems, and lack of certainty about getting backloads. 

Higher freight charges are also due to reduced available resources (i.e. space availability). Hauliers are sending fewer vehicles because they expect lower volume at this time. In addition, there is no direct guidance as to how the UK and EU authorities want the customs declarations to be made (through T1 or EAD customs entries). Therefore the companies are having to cover all eventualities which is, in turn, increasing costs. Hauliers are unwilling to collect freight unless all documentation is submitted and approved in advance. Only then will they despatch a vehicle for collection.  

In addition, customs brokers are currently overwhelmed. 

These issues will settle down as exporters to UK, the UK and EU authorities, and hauliers get their heads around the requirements, and market forces lead to sensible charges.

EU brands not shipping to UK

Some brands are refusing to supply any UK customers, because they don’t want to get involved in understanding what they need to do, and then doing it. These are suppliers who have never exported outwith the EU, so they have never set up the relevant procedures. The consequence is that we have to arrange collection from the factory.  

No drop shipping

Because of customs clearance and documentaton requirements, goods will have to come to us first. (We normally do this for you anyway, so that we can check over the shipment and resolve any problems before they go to site.) Crucially, we remove the supplier’s invoice that must now travel with the goods when they enter UK. You don’t want your client seeing what the difference is between what you paid for the goods and what you are charging them….

Including the shipping cost when you quote to your customer

Whether the supplier, or we, or you, arranges the shipping, there will be instances when no-one knows what it will cost, because it is not yet known what the weight, volume and height of the consignment will be. But shipping costs can be substantial, so (a) the client may not want to approve the order until they know what it will cost in total, and (b) you may not want to absorb them yourself. This problem is nothing to do with brexit, of course: it is as likely for the volume &c. not to be known in 2020 as in 2021, or for a shipment from the USA as from France. 

Because we are so used to dealing with this situation, we sort things out where we can. But, in practice, we all decide what to do on a case-by-case basis.

If you want to import goods yourself

You may prefer to deal with the EU supplier yourself, rather than to let us do it all for you (for free!).

It will normally be easier to get the supplier to arrange the shipping, so this section is mostly for when they can’t, or won’t, or will charge you too much. I’ve added some useful links at the bottom.

Don’t plan to make customs declarations yourself unless you already have the necessary skills, or will be upskilling someone within your business. You would also need to acquire specialist software. So find a specialist to handle them. Normally the most convenient choice will be your freight company.

Find a freight company

Two tips here:

  1. shop around, for the next few weeks, at least. Some are charging very high prices, but not all are.
  2. go to firms that already operate extensively all over the world, not just within the EU.

Get quotes

To get a quote, you will need to provide the weight and dimensions of the consignment. This can be straightforward if it is just one item in its own box. It is another matter if it is a mix of items, for the reasons given above. 

Codes

Your business will need an EORI number.

You products will need a commodity (“HS”) code (these are international, not EU-specific).

Paperwork

This is where you may run into problems. The vendor may be unable or unwilling to provide the necessary documentation—even if you spell out to them exactly what to do. We know whereof we speak…. 

Required:

  1. An accurate and specific goods description must be on the waybill, as well as on the commercial or pro forma invoice (which acts as the Customs Declaration). It must list each item by line, starting with the most valuable.
  2. Values must be included on commercial or pro forma invoices, by line item as well as the total value.
  3. Complete recipient information must be provided: not just the company name and address; but also the name, email address and phone number of the contact person.
  4. The commodity code for each item must be shown, and your EORI number included.

***Hauliers will not load your freight if the paperwork is not correct. If there is an error, and it is found out at import stage, the entire truck will be held until it is resolved—you may find that the haulier holds you liable for the delay.***

The paperwork can be submitted via paperless trade (“PLT”). This is usually incorporated within your carrier’s online shipping tools. 

Rule of Origin

A zero tariff can only be applied to goods that meet the Rules of Origin requirements. If they do, this must be clearly stated on the commercial or pro forma invoice. 

VAT

You will be responsible for the import VAT. It can be significant. For example, VAT on a £10,000 consignment is a further £2,000. There are changes to how this is accounted for: the introduction of Postponed VAT Accounting (“PVA”) makes it less onerous from a cashflow point of view. Note that, for each shipment, you have to declare to whoever is handling it that you want to use the PVA. 

Receiving goods

Goods will be shipped to you as the importer; as the invoicee, you are responsible for customs clearance. The supplier’s invoice to you must travel with the goods (remember, it acts as the Customs Declaration), so if you don’t want your client to see what you paid for them, you have to remove it. Also, some EU suppliers are simply refusing to ship anywhere other than to the invoicee. So sort out in advance where you will have enough space to receive, review and store the goods (it does not have to be your office), and how you will forward them to the project. 

Returns

Returning goods back into the EU opens a whole new can of worms, so I am not covering this topic here. 

Northern Ireland

The rules are different for importing from, and exporting to, Northern Ireland. I am not covering these here either. 

Exporting to the EU 

This email is only addresses importing from the EU. Note, however, that there are new procedures for cross-border sales to consumers worth <£135. You don’t want to go there. 

Links

From gov.uk:  Brexit: new rules are here. Click here. Contains various links.

For Trader Checklist: new rules will affect you from 1 January 2021, click here.

For the UK Government’s web pages that tell your EU supplier what to do, Trade with the UK as a business based in the EU, click here.

For the full text of the EU-UK Trade and Cooperation Agreement, click here. You will never need to read all 1,246 pages, but there may be occasions when you want to know what it actually says, not what someone in the pub thinks it says (as with IP ratiings, CE markings…).

So . . .

. . . as I say, if we are organizing the supply from the EU for you, none of this need concern you, except what I have written above under If you are not arranging imports yourself. If you’ve read this far, you now know what we are taking care of on your behalf. In fact, you’ll realize that we are like a swan: calm and serene on the surface, but paddling like crazy underneath!

That single observation justifies the picture of the swans, on the lake outside the office verandah, taken on Christmas Day. I’d hate to write a blog without at least one image in it! 

About Peter Younie

Peter trained as a Chartered Accountant with Arthur Andersen & Co and was subsequently Deputy Finance Director of the Arts Council of Great Britain, Treasurer of Somerville College, Oxford and Treasurer of the environmental charity, Earthwatch Europe. He has also held senior financial and managerial positions, in the UK and the USA, in the fields of publishing (book and magazine); design consultancy; retail; robotics and technology start-ups, and has been on the boards of several arts organizations. He has degrees from the Universities of Cambridge (English), London (History of Art) and Oxford (by incorporation).

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