Words by Aiala Suso
As the Home Office announced a third national lockdown on 4 January, many Britons were also dealing with the immediate consequences of the post-Brexit reality: the burden of red tape and its associated costs. Many UK products are either stuck at the EU border or have been sent back for not fulfilling the necessary checks. While some UK retailers consider abandoning or burning goods coming from the bloc to avoid return costs, Department for International Trade (DIT) officials have advised them to set up EU-based companies to circumvent border issues. Meanwhile, Ghana has imposed an unexpected £100.000 tariff on Fairtrade bananas.
The UK-EU Trade and Cooperation Agreement was signed on 30 December, immediately prior to its deadline the following day at 11pm. It has been agreed that there will be no tariffs or quotas on any goods moving between sides, as long as they comply with certain rules of origin. At a Downing Street press conference in December, Boris Johnson celebrated the outcome of the tariff-free trade agreement: “We have taken back control of our laws and our destiny”. However, what has come as a surprise for many British businesses is the collateral costs of the regulatory alignment with the EU.
The burden of regaining sovereignty has created complexities for those dealing with the changes firsthand. Britons have had their sandwiches confiscated by Dutch officials at the EU border because they contain unregulated meat and dairy products; lorries have been held for days at the Northern Ireland border because products need to pass security controls; UK seafood exporters have been forced to stay in port as new certifications are required, while product prices plunge; and fishing lorries from Devon and Scotland have gathered at Westminster in protest.
Amongst fears of a double-dip recession to hit the Eurozone after escalating lockdown rules, UK retailers have also been appalled by new costly duties on returns. Some small businesses are considering the possibility of abandoning or even burning goods to avoid returning them from the EU, since they cannot afford the shipping costs. That is because many buyers, both in the EU and in the UK, have been sent an unexpected customs invoice when purchasing products after 1 January. According to the BBC, approximately 30% of goods bought online in the UK are being returned. Retailers from both sides now have to fill out custom declaration forms, and the responsibility to pay VAT charges falls solely on their customers. These costs vary depending on each specific product, cannot be paid in advance and there is no way for the retailers to know how much is going to cost.
According to the Observer, officials at the Department for International Trade (DIT) have advised UK businesses affected by these tariffs to set up companies in the EU to act as distribution hubs, in order to avoid border issues and costly VAT invoices. That is the case of The Cheshire Cheese Company, which is considering opening a hub in France, after being unable to afford the veterinary-approved health certificates for their products that are required before exporting its products to the EU. The unavoidable consequence of UK businesses investing in EU companies is that they would be contributing to the tax system in the EU instead of the UK. The DIT has told the BBC that this advice was “not government policy”.
Regarding cross-continent negotiations, after failing to either rollover EU trade agreements with West Africa or agree to a transitional measure, the UK has been slapped with at least £100.000 worth of tariffs on Fairtrade bananas coming from Ghana. The news was unexpected because the Government announced progress in its negotiations with the African country on New Year’s Eve. Ghana has been unable to agree on a different tariff to its neighbouring members at the Economic Community of West African States (ECOWAS), otherwise they could jeopardise their trade relationship. Farmers, both in Ghana and the UK, worry that the new added costs will lead them to bankruptcy.
On the other hand, the Japanese manufacturer Nissan has confirmed that it will buy batteries from the UK, precisely to avoid tariffs. The news has been gladly welcomed by the UK’s largest car factory in Sunderland, which exports 70% of its cars to the EU. That is because manufacturing batteries in the UK that comply with EU regulations that require 55% of the car value to be made in either the UK or the EU, will qualify for tariff-free exports to the EU.
Picture Credit: Jaku.IT