Breaking down Brexit: The future of customs for road hauliers
As we all know, March 2019 will mark the end of article 50 negotiations and Britain’s membership to the European Union. This also means that, in less than two years, Britain could exit the EU customs union. For some UK-based hauliers, that might imply significant changes to business operations.
We rounded up some expert insights on what post-Brexit customs could look like for the British road haulage industry. Of course, it’s impossible to predict the full outcome of trade negotiations, as talks between Britain and the 27 EU member states are ongoing. But as plans and proposals are put forth, the available options are becoming clearer.
The big issue: Tax and duty
The majority of Britain’s top trading partners are in the EU. Last year, British import and export trade with those countries boasted a total revenue of £358 billion. Up until Brexit, duty-free access to those countries will have been dictated by the 50 free trade agreements for EU member states.
If Britain does completely leave the Single Trade agreement, the outcome could be a reintroduction of duty on goods crossing the continental border. This implies higher logistical costs for UK transport companies moving goods in and out of mainland Europe.
However, those conditions are not yet set in stone. Even if it were to leave Single Trade, Britain could conceivably remain in the customs union just like Turkey, a non-EU member state that benefits from duty-free access. Aside from logistical costs, the bigger benefit of remaining in the customs union would be facilitated movement of goods between the UK and Ireland/Northern Ireland borders, another growing point of discussion in negotiations.
The other issue: Delays at customs
In addition to payment of relevant taxes and duties, a country engaging in trade outside the customs union must also prove the origin of transported goods. This likely means a lot of red tape for transport companies in the event Britain does exit the customs union. Transport firms would likely have to outsource custom agents to fill out paperwork.
That would also mean more delays at ports. Consider that 60% of goods vehicles travelling from UK to mainland Europe pass through Dover Straits Port. If all those incoming and outgoing goods vehicles would have to go through clearance, it could mean increased congestion as each lorry waits its turn.
The western side of Dover Port is a concrete example. That’s where non-EU countries currently have to go through such clearance. How long a lorry is held up is determined by its relevant country of origin and the agreement it has with the EU. For instance, the EU has a special agreement with Switzerland, also non-EU. Ideally, Britain could therefore forge for itself a similar “privileged access” agreement to one of these countries.
The government’s stance
In a debate on Brexit and transport last autumn, the Secretary of State for Transport, Chris Grayling, confirmed that the road haulage industry is a top priority for the government negotiations.
He explained how increased taxes could harm the domestic haulage industry, as higher duty costs risks making British exports less competitive. It would also be bad for manufacturers and consumers, since tariffs on imports would also increase.
To avoid such setbacks, he insisted on fighting for an agreement that would “allow goods to flow freely from and to the United Kingdom”. He also outlined how 85% of the lorries trading goods between Britain and mainland Europe actually belong to EU-owned businesses, suggesting the benefit would be mutual.
The solution: Duty-free fuel zones?
One solution that has been popular among members of the transport industry is the introduction of a duty-free zone for fuel within ports for HGVs entering or leaving Britain, to compensate for potential expenses of new customs tariffs.
The idea is that since the lorries would have fuelled up in mainland Europe, where the average price of diesel per litre is much lower, it would not cost the UK government anything in fuel tax revenue.
Andrew Baxter, managing director of the British logistics operator Europa Worldwide Group and an avid Brexit supporter, is committed to this idea. He says: “Introducing duty-free fuel zones at ports would be good for British business with no cost to the exchequer – demonstrating that we are a progressive nation committed to boosting trade and broadening our reach across the globe.”
That’s all we know so far. Though no reforms are set at this point, what is clear for now is what the industry wants. And that is a mutually beneficial agreement that would work in favour of trade access and minimise disruption at the borders.
We’ll keep you updated on the Total Truck Solutions portal as legislation proceeds.