Retailers could burn goods stuck in EU-UK limbo
New customs arrangements and rules of origin complications since 1 January mean it is now often cheaper for traders and customers to write off the cost of returned goods, reports highlight.
UK retailers could abandon goods EU customers want to return, with some even considering burning them because it is less expensive than bringing them home under the new UK-EU trade rules that have applied since 1 January.
The BBC reported that various major UK retailers and brands have a mounting volume of goods stuck with courier services in mainland Europe, with couriers and freight businesses that ship from the UK to Europe also experiencing delays to goods because of new customs and other requirements.
Adam Mansell from the UK Fashion & Textile Association (UKFT) said it was often cheaper for retailers to write off the cost of goods than dealing with new additional customs costs, “either abandoning or potentially burning them”. He told the BBC that since 1 January, lots of European customers have been presented with an unexpected customs invoice when signing for goods they had ordered from the UK as a result of the new EU trade deal with the UK.
“It’s part of the ongoing small print of the (UK-EU trade) deal,” said Mansell. “If you’re in Germany and buying goods from the UK, you as the German customer are the importer bringing goods into the EU. You then have a courier company giving you a customs clearance invoice that you need to pay to receive your goods.”
He said many customers automatically reject the goods, refusing to pay the additional surcharges, leaving couriers to take them away. And when goods arrive back at depots in the EU, there is new customs paperwork to complete – such as an “export clearance charge, import charge arrival, import VAT charge and depending on the goods a rules of origin document as well”, said Mansell. “Lots of large businesses don’t have a handle on it, never mind smaller ones.”
The BBC said it had seen evidence that four major UK fashion retailers are stockpiling returns in Belgium, Ireland and Germany, with one brand set to incur charges of almost £20,000 to get the returns back.
“It’s a bigger change than we thought possible,” explained Shona Brown from courier Speedy Freight. “Before, we’d get the order to Germany and off the driver would go. Now we’ve got to do export entry detailing where was it made, the driver needs to go to the customs office at Dover, then customs in Germany on arrival and then sort out the VAT.
“There are so many hoops to jump through, it’s so laborious; you’ve got to have manpower to figure out what to do, and with people working from home it’s difficult. For small businesses, it is a huge thing.”
‘Rules of origin’ complications
Various shippers and freight forwarders have highlighted unexpected complications arising from new ‘rules of origin’ arrangements under the deal, including some apparently absurd consequences.
In a briefing to its customers this week, UK forwarder Metro Shipping highlighted that all goods with a UK or EU origin require an appropriate declaration of origin to benefit from preferential tariff rates. Failure to provide this proof of origin could leave the importer liable for duty and – under some circumstances – the EU may even impose duty twice on the same goods.
Although the free trade deal (FTA) agreed in December creates tariff-free trade between the UK and Europe, shippers may be liable to pay duties and taxes if they do not comply with rules of origin, Metro highlighted, adding: “UK-made goods exported to the EU are tariff-free, as they were before Brexit, but goods imported from overseas and re-exported to the EU are subject to tariffs. Simple enough, although not widely understood as part of the trade deal.
“Where it begins to get complicated is where a UK factory processes raw materials from abroad and then exports the finished item. Is the item British, or a ‘re-export’? It gets complicated, because the answer depends on the nature of the product, the proportion of the product that came from outside the free trade area and the specific changes made by the ‘UK processing’.”
Requirements vary from product to product, “which is why the rules take up 50 pages of the trade deal”, highlighted Metro’s business development director Grant Liddell.
“Where it gets crazy is when goods made in the EU can also be liable when exported back into the EU,” something that the head of customs at UK retail giant M&S had explained to Liddell.
“Percy Pigs sweets are manufactured and packaged in Germany and then shipped to the UK; no tariffs are payable because of the trade deal. They are then taken from the M&S warehouses and exported to stores in the Republic of Ireland, which is part of the EU,” said Liddell.
“But, because they have left the EU and not been processed enough to count as being made in the UK, it may be that a tariff needs to be paid to get them back into the EU, despite them having been made in the EU in the first place. If they had been removed from their original packaging and combined with another product, as decorating for example, there would be no tariff because they would have been transformed, but just storing them in the UK is not processing.”
Liddell added that it was “exceptional for countries negotiating such a free trade agreement would have such closely integrated supply chains, so Percy Pigs will not be the only anomaly”.