Brexit was delayed until October 31. The likelihood that Boris Johnson will reach an agreement on leaving the EU before this time seems almost impossible. The tough Brexit is approaching and the United Kingdom (Great Britain) will leave the EU without agreements with Brussels. Thus, the UK becomes the third country. This has far-reaching consequences, in particular in the areas of customs, excise taxes, VAT and logistics.
In accordance with the agreement, after October 31, there will be a transitional period until December 31, 2020, which can also be extended if necessary.
During this period, the EU and the UK may agree on future trade relations. Until then, the UK will remain in customs union with the EU, and therefore the free movement of people and goods will continue. Thus, the negative consequences of Brexit may remain limited, of course, if eventually a free trade agreement is reached.
The recently appointed government, led by Prime Minister Boris Johnson, has explicitly opposed the agreement in principle. The biggest stumbling block is the “backstop” supplement, which many British politicians hate and which is part of the agreement.
“Backstop” ensures that the border between Ireland and Northern Ireland remains open, in which case the UK practically remains part of the EU. It was this step backwards that met fierce opposition from many British politicians. The British are afraid of being held hostage by the EU. Moreover, in this case, the UK cannot conclude its own trade agreements with other countries if it is in a customs union with the EU. And this is exactly what the British government craves. There are already rumors of a favorable trade agreement between the UK and the US that will partially pull the EU out of the game.
Boris Johnson said the UK would leave the EU anyway as of October 31, “a deal or not a deal!”
The tough Brexit has far-reaching consequences in terms of customs, logistics and taxation. Without agreements in the field of joint trade with the EU and without a transition period, the UK becomes a third country, and customs duties are governed by the rules established by the World Trade Organization (WTO) in accordance with the so-called principle of “most favored nations”. This leads to a significant cost item.
Of course, the customs consequences are also applicable in the opposite situation, that is, when exporting to the UK. This will greatly affect the Dutch agricultural and oil sector in particular, as the UK is one of the largest exporters in these areas. Germany will lose one of the largest exporters in the automotive and pharmaceutical sectors.
Despite changes in the logistics infrastructure in anticipation of Brexit, neither Europe nor the United Kingdom is 100% ready for a break. In our opinion, Brexit is a step backward in the field of simplification and automation of logistics processes. In fact, it will cross out everything that can contribute to the development of the economy in an ever-changing world. It will lead to large delays in supply chains and, consequently, financial costs. Information technologies in the field of customs processes require urgent improvement since the existing system is not able to process the amount of data on customs cargo that is expected after Brexit. And also the lack of trained customs personnel can lead to additional costs both for the UK and for neighboring states. If you look at France, an English-speaking worker is in itself a valuable shot even without the necessary professional skills in customs.
Additional customs formalities and documents, training of transport and customs personnel, lack of personnel in state veterinary and phytosanitary authorities, changes in customs legislation in connection with dangerous goods and sanctions legislation, additional border controls and delays, all this negatively affect the logistics processes in almost all business areas.
The cooperation of enterprises with professional and competent customs brokers, companies that can offer a wide range of logistics services for the transport, handling and storage of transit goods is the cornerstone especially in the early stages of Brexit. In our opinion, only flexibility, mutual understanding and professionalism will help minimize financial costs for companies in almost all business areas, especially in this situation.
AB COM, as a customs broker, customs representative, transport company and warehousekeeper in the port of Rotterdam, will help companies in all areas of business to make the transition to Brexit the most comfortable.