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The Brexit agreement reached at the end of December 2020 has left some mobility companies feeling under-prepared for the new EU trading rules, with the new VAT and tariff rule changes proving to be a challenge for some exporters, a report by THIIS has found.

In a worse case scenario, the new VAT rules for overseas firms selling goods into the UK has led to some EU businesses stopping trade with the UK, according to a report by the Institute of Export & International Trade (hidden: www.export.org.uk).

VAT is now collected by HMRC at the point of sale, rather than at the point of importation – the rules of which were announced in July 2020. The change requires overseas sellers to register with HMRC and account for VAT themselves when the sale is lower than a value of £135.

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With VAT registrations taking up to two months, the report states that some companies have even decided that the administrative burden makes it not worth continuing with UK trade.

The new system means HMRC has to check more than a million additional parcels a day for VAT compliance.

There are also fraud risks for retailers, continues the report. In particular, concerns that compliant retailers will be at a competitive disadvantage to firms that dodge the system.

A separate report by BBC News also revealed that international shipping companies – including FedEx and TNT – have been levying additional charges on shipments between the UK and EU to cover new administrative charges as a result of the end of the transition period.

THIIS spoke to some mobility industry insiders to understand how the new transition rules are affecting them…

Barend ter Haar
Barend ter Haar

Has the end of the Brexit transition led to any disruption for you?

Barend ter Haar, Director of BES Healthcare: “Yes. Publishing an extensive document on Christmas Eve at a time when many people are already off on leave until the New Year has meant that we have had to start operating under the new rules without being fully briefed on them.

“One knock-on effect has been that our carriers’ computer systems are not fully up to speed with handling out products and therefore there are port delays.  Although the headline was ‘tariff free trading with the EU’, this is not true for all products. It also depends on each tariff what percentage of materials have been sourced in the EU/UK.  The listing of these MaxNOM values have to be dug out of the Christmas agreement.”

Ian Jones, Managing Director of Care and Independence: “Not materially, although like everybody, we were waiting until the 11th hour for confirmation and this impacted our ability to plan and communicate what changes were required to ship goods to customers and partners in Northern Ireland and within the EU.”

Peter Slack, Executive Vice President Operations of Handicare: “We’ve been working hard across all areas of the business to reduce lead times and increase stock availability across all product lines and sites in the UK and Holland in preparation for any delays there may be due to circumstances outside our control in relation to both the Brexit transition and the pandemic. We remain committed to making everyday life easier for our customers; and the measures we have taken ensure any potential challenges create minimal disruption.”

Do you expect any disruption to your firm this year due to the transition?

Barend: “Yes. Getting on top of these variable EU tariff rules will cause ongoing disruption.  Keeping on top of the one-off deals with non-EU countries will be an extra challenge for all exporters – and importers.

“In addition, [there will be disruption] deciding the cost/benefits of operating transiting rules to some stock that we buy in from outside the EU and sell into the EU. We do not need to pay tariffs on the transiting goods since the tariffs will only apply as the goods crossing into the EU are still being assessed.  Do we want to, and are we able to, operate the customs warehousing scheme, or the inward/outward processing scheme?

“Further disruption is arising from the UK sticking with the MDD (Medical Devices Directive) for the time being, while our EU customers will be working with the MDR (Medical Device Regulation) from May 26, and there’s no pathway mapped out yet for when Great Britain will have a replacement for the MDD, nor what it will be. Meanwhile the MDR means that we have to meet the new European Regulations, while also continuing to meet the Great Britain ones.

“The peculiar status of Northern Ireland as being partly under Great Britain and partly under EU regulations adds further administrative load.”

Ian Jones

Ian: “We anticipate a positive impact on orders as we manufacture all products in the UK with key Tier 1 suppliers also within the UK. As importers may struggle with supply chain disruption, we have already seen some customers second-source, or begin discussions, about moving supply to Care & Independence, as a more assured producer with a shorter lead-time.”

Peter: “Handicare is an experienced exporter familiar with the checks and entry declarations associated with the transportation of goods outside the EU. We will continue to use our Kingswinford site as a central hub for UK distribution of products manufactured in Holland. This means partners in Great Britain, Northern Ireland and Ireland will not need to complete any customs declarations as we will handle them in advance or while the goods are in transit.

“We don’t anticipate partners will experience any significant disruption or changes to our usual service due to the transition. We do however recognise there will be some increases in the cost of logistics and customs administration which we have committed to covering in the short term.”

What actions is your firm taking to avoid any disruption?

Barend:
“We are liaising with our suppliers and customers to get our paperwork as accurate as possible to avoid delays.  We are using the services of our carriers to prepay for our customers in the EU any tariffs and VAT and include these in our export prices, where our customers are not VAT registered in their own countries, to avoid delay due to the needs to collect the taxes before delivery.

“We are making full use of the advisory services of the Institute of Export and our accountants’ webinars, etc, to keep as up with the game as well. We are liaising with our overseas suppliers to have goods UKCA marked as needed, and a UK REP in place.”

Ian:
“We have increased our production and stockholding capacity steadily over the last six months as well as stepping up New Product Development (NPD), so that our customers have a wider selection of available options in choosing the product that best fits their requirements.”

Peter Slack
Peter Slack

Peter: “We have increased stock levels in Kingswinford (straight lifts and spare parts) to minimise disruption as a result of border and logistics delays particularly in the early stages of this year. As a sizeable operation, using dedicated vehicles to transport goods between our Netherlands and UK sites will minimise any risk of delays caused by mixed loads and multiple paperwork checks/problems. It’s early days but so far there has been no significant disruption.”

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