UK firms stung by €5bn in customs fees as confusion reigns over EU trade pact

by Benjamin Fox

Customs duties paid by UK businesses increased by 64% to a record £4.5bn (€5.2bn) in the year to 31 January 2022, up from £2.9bn (€3.6bn) in the previous 12 months, according to research released on Wednesday.

The figures come as firms struggle to adapt to the new rules imposed under the post–Brexit trade deal.

Accountancy firm UHY Hacker Young, which undertook the research, attributes the increase to rules of origin and GB firms’ lack of awareness that proof of origin needs to be provided to enjoy the tariff-free trade provided for under the Trade and Co-operation Agreement (TCA) between the EU and UK, which came into force last January.

Origin rules determine the economic nationality of your goods and determine whether goods can avail of preferential rates of duty.

UK trade with the EU and overall has dropped in the two years since the UK left the bloc, though the bulk of this is the result of the COVID-19 pandemic.

While the EU introduced customs checks on goods arriving from the UK at the end of the post Brexit transition period in January 2021, the UK government has repeatedly delayed introducing its own controls on EU goods. It now intends to introduce them in phases until November.

The customs figures are likely to increase significantly this year if, as expected, trade volumes continue to recover from the disruption caused by the COVID pandemic and as product ‘Rules of Origin’ requirements become even stricter. The figures show that the last five months to 31 January 2022, as economic restrictions continued to ease, there was a further surge in duties paid, with over £2.1bn (€2.5bn) paid in that period alone.

Customs declarations for all standard goods became a requirement from January when the UK government introduced requirements that importers show an origin declaration at the point of entry. Failure to carry a declaration would leave businesses liable to pay the full rate of customs duty.

Forty-five per cent of British firms reported difficulties adapting to changes in rules for buying or selling goods, according to research published by the British Chambers of Commerce, with confusion over rules of origin requirements, customs duties and VAT cited among the most common additional burdens.

“One of the great promises of Brexit was freeing British businesses to give them the headroom to maximise their productivity and contribution to the economy – even more desperately needed now on the long road to recovery from the pandemic. Yet the only detectable impact so far is increased costs, paperwork and border delays,” said Meg Hillier, the Labour chair of the UK parliament’s Public Accounts Committee, earlier this month.

*first published in: www.euractiv.com