EU Goods Sub Committee report reveals ‘substantial barriers’ since Brexit for UK trade with Europe

A report by the House of Lords’ EU Goods Sub-Committee has warned small firms are “feeling the squeeze” since the Brexit deal with Brussels came into force in January and there remains “substantial barriers” for UK trade with Europe and small businesses bearing the brunt post Brexit.

The committee is calling on ministers to establish a trusted trader scheme to tackle the amount of paperwork that businesses have to complete, whilst also helping with the increased cost of transporting goods and giving firms time to understand the VAT changes when exporting to the EU.

In the Beyond Brexit: Trade in Goods report, it said there “remains substantial barriers to trade with the EU” following the implementation of the fresh trading terms.

It also warned that, without appropriate action, the physical checks currently in situ on plant and animal produce could become a “permanent barrier to trade”, with meat and live shellfish produce worst hit by the new inspection regime.

The committee’s chairwoman Baroness Verma, said:

“The Brexit trade deal struck with the EU may have prevented the nightmare of a ‘no deal’ exit for the UK, but a lot of unfinished business remains between the two sides. Businesses, particularly SMEs (small and medium-sized enterprises), are feeling the squeeze of the non-tariff barriers resulting from the end of the transition period.

The government must take an ambitious approach to trade ties with the EU. Swift action and further funding is needed to minimise future disruption.

Ongoing dialogue will be crucial to achieving smoother trade. The TCA (Trade and Cooperation Agreement) should be treated as the start, not the end of the UK’s new relationship with the EU.”

The report stated a series of recommendations for clarifying the requirements on exporters.

It stated that “On customs, we recommend a trusted trader scheme to enable more businesses – especially smaller businesses – to benefit from simplified customs procedures,”

The “complicated and varied VAT rules in different EU jurisdictions” were described as “among the most problematic non-tariff barriers to trade”, with the committee asking for “advice and support to increase understanding among traders of new VAT implications”. This is following the government’s decision to delay the release of its own programme.

On rules of origin stipulations, the committee said: “Only goods originating – or mostly originating – in the UK or EU will qualify for zero tariffs. The requirements will hit smaller businesses hardest but clarifications and mitigations, particularly on the re-export of non-processed goods, are urgently needed for all.”

Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), said:

“At a moment when small firms are up against it like never before, those that trade internationally – often our most innovative and profitable businesses – are being hit with reams and reams of new paperwork. They simply don’t have the time or money to manage it.

Unless we ease the admin burden being placed on our small importers and exporters it’s going to weigh heavy on our efforts to get the economy firing on all cylinders again.”

Border controls that affect imports & exports post Brexit

Since formally leaving the EU on 31 December 2020, the UK and the EU have been operating under a new trade agreement. In this agreement, goods traded in between the UK and the EU shall not be subject to any tariffs or quotas on all goods that comply with the appropriate rules of origin. However, Customs formalities will be required by both parties in customs areas, and VAT and certain other duties shall apply upon import.


Let’s look at the different stages of import and export processes and how they are being affected, with a focus on Spanish exporters.

Exporting from Spain

Spanish exporters benefit from the fact that intracommunity operations are very simple with regards to VAT. Previously duty registered in the ROI Register by Spanish exporters, needed to have an EU VAT Number and to be registered in the VIES (VAT Information Exchange Service). If both importers and exporters have an EU VAT Number, exporters will issue a VAT Free invoice to the buyer. This rule changes if one of the parties does not have the EU Vat Number.

In contrast, extra community operations are subject to a number of additional formalities, such as obtaining the EORI Number and issuing a number of documents (depending on the commodity to be exported). From the Spanish perspective, and although export invoices are VAT exempted, the main issue is that the goods will have to be cleared at customs before entering the UK and therefore face customs formalities.

Brexit changes in customs policy

The main impact of Brexit for the UK with regards to imports and exports is that it is now regarded as a third party, thus triggering the need to process imports through customs. EU Regulation 952/2013 of the European Parliament is no longer applicable in the UK.

In order to try to minimise the impact on the UK’s economy, the UK Government decided to implement border controls in January and again in April and June 2021. Hence, from 1 January 2021, standard goods arriving in the UK require a EIDR (Entry in Declarant’s Record) as part of the simplified customs declaration process is made. Importers are allowed a six month period to carry out customs declarations, and checks are only carried out on controlled goods such as toxic chemicals and excise goods like alcohol or tobacco, high-risk live animals, and plants.

The initial plan was to implement an intermediate step on 1 April and proceed to full implementation on 1 July, when full safety and security declarations would have been compulsory. However, pursuant to a written statement made on 11 March, the UK Government has decided to postpone both the planned intermediate step on 1 April, and the full implementation scheduled for 1 July. The next significant date in the calendar is now 1 October 2021, from when additional requirements will be necessary, especially for those trading goods subject to sanitary controls, such as products of animal origin, fishery products and live bivalve molluscs, high-risk food and feed not of animal origin, and plants and plant products. Export Health Certificate requirements for products of animal origin and certain animal by-products will come into force at the same time. The UK Government has taken the view that, although most businesses – and the UK’s workforce and infrastructure – would have been ready for the so-called Stage 2 on 1 April, some others needed more time to prepare. 1 January 2022 will bring additional requirements, with a view to setting March 2022 as the date when checks at Border Control Posts will take place on live animals and low risk plants and plant products.

How Brexit is affecting Spanish exporters?

The UK has traditionally been a stronger market for Spanish exporters than Spain has been for UK exporters. Between 2015 and 2019 an average of over 19 billion euros of exports from Spain to the UK took place, in comparison to 11.5 billion euros of UK goods imported into Spain.

All flow of goods between Spain and the UK  from January 2021 ceased to be considered intracommunity transactions and became subject to customs formalities (except for exports of goods to Northern Ireland, which will continue to be declared in the Intrastat system).

Although UK importers are most likely to be affected by the customs regulations, Spanish exporters are also facing related challenges due to Brexit. Customs invoices now must be issued, and goods have to be properly identified with their tariff code to avoid delays. Interestingly to note, the CE marking is no longer mandatory for products sold to UK customers.

Since EU legislation requires that all goods brought out of the EU customs territory be risk assessed and subjected to customs controls before departure, an exit summary declaration (EXS) also needs to be submitted.

How is Brexit affecting UK importers?

Post Brexit, there has been no changes to the general substantive safety requirements required for products to be sold in the UK, with regards to the General Product Safety Regulations 2005 (GPSR). Neither has there been any change to sector-specific product regulations. The UK Government has expressed a desire to remain closely aligned with EU product safety standards in order to facilitate trade, but the future position remains uncertain. Northern Ireland remains subject to a slightly different regulatory regime and further changes may happen in the future.

Despite product safety requirements remaining the same, there have been two key changes for importing products to the UK:

  • the UK is now a separate market to the EU and it will have an impact on who is considered responsible for the safety of products placed into the UK market.
  • the UK is no longer apart of the EU CE-marking regime, or the Safety Gate/RAPEX regime for sharing defective product information and facilitating recalls.

Product safety responsibility

Schedule 9 of the Product Safety and Metrology Regulations 2019 came into force at the end of 2020 and made several amendments to the GPSR. One of the main effects of these amendments is that the ‘producer’ (to whom the primary product safety obligations attach) may change.

Essentially, the manufacturer of a product will retain the ultimate responsibility for the conformity of the product to the relevant product safety regime, provided that the manufacturer or its representative is established in the UK market. If the manufacturer (or representative) is not established in the UK market, then the importer of the product to the UK will be considered the “producer” of the product, and will assume the responsibility.

Producers must comply with the GPSR and any other relevant product-specific regime and take reasonable steps to ensure that the product is safe to use and minimise risks associated with the product, such as providing labelling and warnings where appropriate and ensuring effective traceability and reporting.

The practical impact on UK importers is that in the absence of the product manufacturer being established in the UK market, the importer will now be considered a producer, and will assume liability for the safety of the product. This exposes many previously unaffected importers to potential defective product claims and places a greater regulatory burden on importers to ensure product safety compliance.

Labelling and reporting

The UK (with the exception of Northern Ireland) will no longer be part of the EU CE marking regime for indicating conformity with product safety regimes. From 1 January 2021 the UK requires products being placed on the UK market to bear the UKCA (UK Conformity Assessed) mark.

Currently, the technical requirements and the conformity assessment processes and standards used to demonstrate conformity for UKCA purposes remain largely the same as those supporting the EU regime for CE marking. The UK Government may diverge from this position in the future, but currently any product bearing a CE mark should be able to bear a UKCA mark.

In most cases, a transitional period applies so that the UKCA mark will not need to be applied to any products marketed in the UK before 1 January 2022, and products labelled with the CE mark will be considered to have conformed with the updated UK regime. But, in some cases the UKCA mark is already required to be applied to goods placed on the UK market (since 1 January 2021). This requirement does not apply to existing fully manufactured stock, but from 1 January 2023 the UKCA marking must be permanently attached to the product, as opposed to being printed on packaging or applied in any other temporary manner.

Additionally, as of 1 January 2021, the UK is no longer part of the EU RAPEX product safety regime for identifying and sharing product information on defective products and coordinating product recalls. The UK Government intends to set up a similar regime, but until it does, importers do not need to have regard to RAPEX alerts relating to products for sale on the UK market. It may however be sensible to pay attention still if a product is subject to a product recall in the EU, in order to protect importers from potential product liability claims as discussed above.

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UK unveils Border Operations Centre: but is it too little too late to avert a Brexit import crisis?

The UK government revealed this week that it has established a border operations centre to monitor the flow of goods and travellers in and out of the country. It’s hoped that the facility will alleviate some of the anticipated border disruption that could last months as the country leaves the single market and customs union.

Regardless of whether there is a post-Brexit trade deal, french authorities will impose full EU customs and controlled goods checks on all goods arriving from Britain from January 1. Current legislation states that all produce must be inspected at its first port of call into the UK.

Ministers fear the checks could lead to queues on this side of the Channel, with the possibility of up to 7,000 lorries waiting for two days in tailbacks. It will also affect the shelf life and route to market of a significant amount of the UK’s fresh produce increasing wastage amounts and CO2 emissions.

These concerns are shared by some of the UK’s key players in the logistics, shipping and import/export industry.

Mike Parr is director of global fresh produce cargo specialists, Perishable Movements Limited (PML). His team has been importing fresh produce from outside of the UK since 2003 and reiterates the concerns raised by ministers.

“We’re so close to Brexit; it’s imperative that the government start addressing key questions if we are to ensure that our borders can cope with leaving the European Union.” 

“Who will be running these facilities and where will they find and train the staff needed to deliver a service that meets the exacting standards of DEFRA inspectors and vets?”

Mike Parr’s comments reflect the wider industry atmospherics that query why the government has failed to call upon the expertise of commercial companies practiced in the day-to-day handling and processing of imported produce.

Earlier in November PML opened it’n new Border Control Post (BCP) in Spalding to streamline and fasttrack its process of importing fresh produce to the UK while future proofing against Brexit chaos for its customers.

“There are a number of purpose built handling facilities across the UK which the government should be using as inspection facilities to relieve the pressure on the UK’s ports. By failing to consult with industry experts, consumers and businesses that work with imported goods face a bleak start to 2021 which will affect national supply chains, transportation links and much more. This is not what the industry needs after a difficult year navigating Covid-19”, added Mike.

Labour’s shadow Cabinet Office minister Rachel Reeves said ministers were “once again” putting the “burden on businesses to prepare for the end of the transition period, when it has not explained what it is those businesses are getting ready for”.

She continued: “The government is rebadging a basic element of preparation but still can’t tell us how many customs agents are recruited or trained or whether crucial IT is ready.

“With glaring questions like these still unanswered, this government must do much more than just ‘demand action’ from UK businesses, already under huge pressure from the pandemic – and instead provide them with some much needed answers.”