Thousands of UK firms may need to set up an EU office

Thousands of UK businesses may need to set up an EU presence if they want to export goods to European markets, according to trade consultants Blick Rothenberg.

Both EU and UK law will require companies to “have a door to knock on” if there are any disputes over payment and compliance with customs changes that will treat the UK as if it were any other non-EU country after 1 January.

Many EU companies do not want the additional risk and cost of being responsible for compliance with customs procedures. Large EU importers of UK goods want the products delivered to their warehouse door, with the UK exporter taking that responsibility.

One other option is to pay an official distributor or a customs and freight forwarding agent in the EU to bear the risk that new paperwork and payment obligations are satisfied.

Given the new complexities, industry sources have told the BBC that few agents will be prepared to take that risk. Those willing to take a risk will likely charge a “king’s ransom” to do so.

Simon Sutcliffe, Blick Rothenberg’s customs expert, told the BBC: “Any agent will be ‘joint and severally liable’ for any customs debt should something go awry or the local fiscal authorities find a problem with the consignment. Understandably, these agents charge a lot of money to bear that risk.”

‘Little time’

The only remaining option will be for UK exporters to set up a registered office in the EU with the staff and technical resources necessary to file the relevant paperwork and keep relevant records.

These requirements cut both ways. EU companies exporting to the UK will face the same problem. EU exporters may have to set up UK offices – both EU and UK law is clear that someone will have to bear the risks of any customs problems. Supermarkets in the UK, for example, will not want to take responsibility for completing customs procedures for thousands of EU suppliers.

Mr Sutcliffe added: “The problem is that thousands of businesses on both sides of the channel just don’t realise the implications of trading with each other from 1 January, and they have very little time to work it out.”

He said these issues would present a major challenge to UK-EU trade “unless the company is willing to become ‘established’ and set up a presence, maintaining business records, have some form of technical resources and staffing, they will not be allowed submit any customs documents. This is true on both sides of the channel”.

Given that the UK imports far more from the EU than it exports, the onus may fall more heavily on EU exporters to the UK. That may mean jeopardising the flow of critical goods into the UK.

Alex Altmann, who heads Blick Rothenberg’s Brexit Advisory Group and is also a chairman at the British Chambers of Commerce in Germany, says: “The government’s communication is a disaster. We have 90 days to sort this out now or EU supplies of food, medication, PPE and many other items won’t be allowed to enter the UK due to an overseen technicality of the new customs code. The UK government needs to comment on this very quickly now.”

HM Revenue & Customs did not dispute Blick Rothenberg’s analysis and issued the following statement: “The UK has a well-established Customs Agent community and government has invested more than £80m in building further capacity, supporting the customs intermediary sector with training, new IT and recruitment. We urge people to go and talk to a customs expert to find out what they need to do to get ready.”

These issues will arise whether or not the UK and EU strike a free-trade agreement as both sides have insisted they would prefer.

HMRC estimates the cost of filling in 200 million customs declarations alone – deal or no deal – will cost UK business more than £7bn a year.

What seems clear is that the UK’s departure from the EU single market and customs union will not mean less cost and paperwork, but more when it comes to dealing with the UK’s closest and largest trading partner.