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Brexit impacts EU-UK trade post-transition period

Feb '21
Pic: Gary Perkin / Shutterstock.com
Pic: Gary Perkin / Shutterstock.com
After the completion of the transition period of Brexit on December 31, 2020, EU and UK customers came under burden with unexpected duties and taxes on various products. Additional taxes are imposed for product returns, which affect the profit margins of retail companies, more so for e-commerce retailers. Hence UK-based big brands suspended sales to EU.

Courier charges between the two regions have also increased with potential additional administrative costs. Under new rules, anyone sending parcels from the EU to the UK needs to fill in forms including proof of origin and the reason for sending the package. Retailers selling to the UK must pay customs duties and fill out declaration forms, as well as register for value-added tax (VAT) in the UK.

Further, VAT relief on imported goods under £15 has also been abolished. Hence, some retailers and delivery firms are charging extra from customers to cover this cost. The charges depend on the country, whether the package is a gift or commercial goods, and its value. Goods under €35 which were previously exempt from VAT, are now taxable.

The UK companies have to pay a duty on import of products when outsourcing from non-EU countries with additional charges to export that products. These products need to follow the complicated rules of origin to get a tariff-free status. Hence few big brands suspended their product exports/online sales to EU.

In addition, product returns by the EU customer to the UK brand and the UK customer to the EU brand face extra duties and taxes, apart from the duty paid while shipping the product.

According to the UKFT (UK Fashion & Textile Association), Brexit may increase in freight levels after reopening of the retail stores in the region. For online stores, the costs got increased with use of Mastercard plans and additional fees incurred for customers using a UK card to buy a product from an EU retailer.

The UK fashion industry and retail sector may face more challenges due to the government’s abolition of its VAT (Value-Added Tax). It may incur additional charges for showcasing their products at the trade shows arranged in the EU region.

According to international members at the Road Haulage Association (RHA), Britain’s exports to the EU plunged by 68 per cent in January 2021, after the end of the transition period. Businesses and hauliers have adapted new trading arrangements, including new systems for companies and officials in the British province of Northern Ireland. Some businesses have struggled with new customs declarations and health certificates.

Source: TexPro

Fibre2Fashion News Desk (RKS)

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March 2021

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