How can you avoid any costly border delays in the event of a no-deal Brexit? Apply now for trusted trader status, says Bob Jones, KPMG in the UK customs lead.
On a crisp day, you can see from one side of the Channel to the other. Yet the passage of products imported and exported between the UK and EU will be anything but clear if those White Cliffs symbolise a No Deal Brexit in March 2019.
I don’t want to paint too doomsday-like a scenario: there’s a reasonable chance the UK and EU will agree a transition deal, and possibly even a trade deal before March 2019, that will keep the £554 billion worth of EU-UK trade in goods and services rolling. However there is a ‘non-negligible’ chance they won’t. And given the fact that EU negotiations tend to go down to the wire, businesses will have no time to react. In that scenario, frictionless trade would come to an abrupt halt and the UK would immediately revert to WTO “Most Favoured Nation” terms which are far from frictionless. Not only would we see the application of import tariffs, in some cases, punitive; businesses would also experience a sharp spike in mandatory administrative requirements.
A cliff edge departure could deliver an unprecedented workload for HMRC’s customs operations. HMRC currently processes around 55 million customs declarations each year. That could rise by 200 million to 255 million, which could add £4 billion in administration costs to business, according to the Institute for Government. HMRC already estimates some 5000 new customs officers would be needed to cope, as 180,000 new traders, many of them small and medium-sized businesses, suddenly find themselves subject to import and export checks.
Nor will technology immediately offer a silver bullet. HMRC is launching its new Customs Declaration Service in January 2019, but the technology was not designed with the complexity of Brexit in mind: the system may not have full functionality in place before the UK leaves the EU.
A five-fold increase in customs declarations could easily translate into major delays at UK/EU border ports. That’s a critical issue for businesses running just-in-time operations with, say, eight-hour delivery contracts, or those dealing with perishable goods. A mere two minutes in additional customs processing time at Dover could lead to 17 mile tailbacks on Kent’s motorways according to the Freight Transport Association. Six minutes and it’s back to the M25.
And those customs hold-ups would be costly. We estimate that if shipping containers alone were delayed in UK ports by just one day, the country could face demurrage costs at current rates of at least £126 million – quite possibly far more.
So, if your business currently relies on seamless trade to, say, source your machine parts bang on time from Germany, ship in pharma products from France or supply your customers with exotic fruits from Africa in December, how do you avoid potential customs chaos?
The answer: make your business more Brexit resilient by applying for Authorised Economic Operator (AEO) status.
AEO can not only enable a smoother journey through customs. Its requirement that businesses fully analyse their own supply chains can also help flush out where any new opportunities – and better ways of doing business – might lie in the post Brexit world. It might just help open the door to truly global trading opportunities.