Brexit: Shipments costs raise and new HMRC rules halt EU-UK trade

As the record-time trade agreement kicked in on the 1st of January 2021 both sides have begun to adapt to the changes. Retailers selling, and freight forwarders transporting goods across the Channel are two of the first few stakeholder groups to experience the effects of the new rules. 

Shipment costs four times higher

Data shows that the cost of moving freight from France to the UK has increased almost four times as a result of the new regulations and the chaos caused by the closure of the French borders in an attempt to keep the new strain of coronavirus away from mainland Europe. 

In the final week of 2020 spot rates for last-minute shipments for a full truckload reached as high as €6 per kilometer. Compared to the normal average of €1.5 – €3, these have been described as “not normal” by Stephan Sieber, the chief executive of Transporeon, the global logistics platform that collected this data. He highlighted that it’s normal to see spot rates go up a little over the holiday season due to shortage of available lorry drivers. However, increases recorded in the previous years in December have never reached these levels. 

As France opened up their borders, long queues in Dover started easing up. What’s become more evident is the increased number of freight rejections as lorry drivers fail to present the required paperwork. Most recent data shows the rejection rate is still 79% higher than third-quarter average. 

Many truck drivers expect the chaos in Dover and Calais to return as the UK and the EU continue to adapt the new rules and regulations throughout January. 

UK customers deprived of EU products

During the Brexit deal negotiations, there was a strong emphasis on coming up with rules that preserve fair competition on both sides of the Channel. What might have been overlooked is how the customers’ access to a wide range of competitively priced goods will change as a result of the new trade deal. 

Despite the zero-tariff, zero-quota agreement on goods trade, some EU specialist online retailers say they will no longer deliver to the UK due to the tax changes imposed as a result of the Brexit deal. Messages on websites, such as the one on a bike part retailer called Dutch Bike Bits, said “We are forced by British policy to stop dealing with British customers”.

On top of increased shipment cost, greater bureaucracy, retailers selling their goods to the UK have to now adhere to new VAT rules. The Brexit deal meant that VAT is now being collected at the point of sale, rather than at the point of importation. As a result, the HMRC requires them to register for UK VAT and account for it if the value of the sale is greater than £135. 

The new VAT rule was imposed in order to protect the UK businesses from unfair competition from EU retailers benefiting from VAT-free imports. In a conversation with the BBC, Richard Allen, the founder of Retailers Against VAT Abuse Schemes said that the boost in international online shopping had led to many retailers engaging in VAT evasion practices. The new VAT rules were created to tackle this issue. However, the government has not specified how the HMRC would deal with those who fail to register. There is no plan in place to regulate this. 

Some companies have decided to incrementally put the extra costs on their customers. FedEx/TNT, international shipping company added a surcharge to their shipments between the UK and the EU.

“FedEx/TNT has been making incremental investments to adjust our systems, processes, resourcing and customer-facing solutions to ensure readiness for the change on 1 January 2021,” said the company’s spokesman.    

What effects has Brexit had on your business so far? Here at UKCS, we become the extension of our clients’ team, supporting them with all aspects of customs regulations and formalities. If you’re looking for support from experts, get in touch!