El Dorado turns into a government-advised exodus

It has now been one full month since the transition period ended and especially trade had to do business under the proper rules of being a third country. And what a joy it has been. Within a week, DPD suspended deliveries between EU and UK, Waterstones (books) and John Lewis (everything household) stopped selling to European customers, Marks & Spencer (food) had empty shelves in their Paris stores, Debenhams (clothes) closed its online business in Ireland, Fortnum & Mason, famous for their luxury food, halted deliveries to Northern Ireland and the EU. Even Amazon UK now wants an “import fees deposit” for EU orders.

But it works the other way around, too. French wine, Italian cheese, Dutch bike parts or Belgian beer can no longer be had here; the companies won’t sell to GB. My local Lidl is still well stocked, surprisingly, but even here you can see the occasional empty shelf. Plus, customers in the UK who do buy in Europe now have to pay VAT and possible customs, and it’s impossible to know how much beforehand. Plus definitely delivery charges on top of the price they see. Royal Mail wants £8 regardless, DHL takes 2.5% or a minimum of £11, TNT £4.31. The best way I found to explain how this tax and custom system works is this:

“Let’s say if you want to buy the latest and greatest Adidas Predator 20+FG football boot from a German website they want €195.97 (the price on Adidas Germany’s site). That is over the VAT threshold of £135 (search for “notice 143” if interested to find out more) so VAT needs to be paid. Lets say shipping was an extra €10 and then there was €5 for insurance. Total cost is €210.97. The courier will pick it up and bring it to the UK but as pointed out above you won’t get it until you pay fees.

To figure out how much fees are likely to be:

1) Figure out the HS (Harmonized Schedule) code at http://www.trade-tarriff.service.gov.uk/sections. HS codes are a system run by the world customs organization (WCO, yes that’s a thing) to provide a global standard classification for all types of goods. The Trade Tariff website will tell you whether import tax is due. For football boots, it’s 8% according to that site.

2) Next up, how much is €210.97 in GBP? The UK government defines them on a monthly basis and you can find them at https://www.gov.uk/government/publications/hmrc-exchange-rates-for-2021-monthly. To save you reaching for a calculator, it’s £190.49.

3) First you add the 8% import tariff. That’s £15.24.

4) Next you add the VAT which is calculated against the cost of the shoes + shipping + insurance + import tax. That’s right, you have to pay VAT on the import tax. £190.49 + £15.24 = £205.73 and that’s what the 20% will be due on. In this case, £41.15.

5) Total cost =
£190.49 for the shoes + insurance + tax,
£15.24 for import tax
£41.15 for VAT
Total = £246.88.

10) Finally, add on whatever the courier fee was.

Of course, back in the pre-brexit days, you’d have paid for the shoes on adidas.de and the price would have incorporated the 19% VAT rate in Germany and that would have been that. We’ve left the customs union AND the single market, hence all the new taxes.”

(Thank you, Fwoggie)

The issue is two-fold. On one hand, there is the mountain of paperwork in the form of import or export documents, certificates and permits that the actual merchant has to deal with. Of course these forms are not standardised, so two sets are needed each way. And the number easily doubles when dealing with food stuff. Plus, the additional cost to the end customer. On the other, it’s the haulage itself that needs documentation either way. The biggest obstacle is the so-called T1 guarantee – a haulier needs to give a financial guarantee for VAT due on the cargo when entering GB, for every single truck. Not every haulage firm can afford that, so companies decline to deliver to the UK. The real clusterfuck happens when hauliers have consignments from more than one merchant in the back. Each parcel needs its own set of paperwork.

The fishing industry is in a particular bind. They were the ones screaming the loudest pro-Brexit and during the negotiations, elevating this 0.4% GDP industry to the apparently most important thing in the deal. And getting sold out in the end. Now, they are getting shafted again. Exporters have to fill in seven further forms in addition to the usual when selling fish to Europe. And that’s only for one kind of fish. If you have a mixed consignment, the paperwork goes up 7 additional forms for each type of fish. There is even a 33-point selling flowchart:

(c) Daily Mail

It’s a far cry from Dominic Raab’s protestations that the deal was “a great deal” for the fishing industry. Especially considering they lost about 80% of their income in the first fortnight. Add to that Johnson’s blame shifting that these “teething problems” were only due to them not filling in the right forms and you have a regular love fest.

And don’t get me started on Northern Ireland…

Who needs to know the rules on time anyway

It’s not like this wasn’t foreseeable. While France, Belgium and the Netherlands used the time at hand and built up their infrastructure at the border points, the UK’s IT infrastructure is still in beta, never mind the actual facilities. From the 5,000 customs agents promised by Michael Gove in November to help businesses and hauliers, so far 1,570 are actually there. But instead of sucking it up and doing something about it, the UK is prepared to lose money. An estimated £800m in tax & customs will not be collected by HMRC this year in order to facilitate traffic flow as opposed to checking the paperwork. Unilaterally. It’s not like we need the money, or anything.

Speaking of which: The full set of guidance called the “Border Operating Model” came out 31 December 2020, just in time for the rules to come into effect the next day. Exporting to the EU alone is 73 pages; importing to the UK twice as much. Going through that document is like playing hare and hounds – each page has at least two other links to further documents on the government website. I gave up after my browser told me I have 32 tabs open and I got confused as to which one refers to what. The guidance on duties and customs contains a link to the Department for International Trade called “great.gov.uk.” (no kidding) Its Brexit Transition Check is a couple of questions, which in the end lead you back to the Border Operating Model, and the fun starts again. Thankfully I don’t work in import/export. Additionally, the “Hauliers’ Handbook,” announced for September last year, had to be reworked so it does actually include a list of checks and documents drivers need to have, and was published on 8 January. Plenty of time for everyone to familiarise themselves with the new rules, obviously.

Next to losing money intentionally (since when does the taxman not come after you?), what’s the solution to the teething problems? UK businesses are now encouraged to set up depots and subsidiaries in the EU. No joke: This entire debacle of Brexit was based on “getting rid” of the EU and “because sovereignty,” and the answer to the UK being shit-all prepared after 4 years is to set up shop on the continent instead. With the losses in revenue, trade, jobs etc. for the UK economy that this will include. About 500 companies have already checked out the Netherlands, another 70 look at Austria, Belgium is open for business as well. These are only the official numbers. And what is the answer from Westminster? “We have taken back control of our trade to deliver jobs and prosperity across the UK,” says international trade secretary Liz Truss.

Denial and delusion get a completely new meaning here. You cannot make it up.