Post-Brexit customs chaos could choke UK apparel retailers

On 29 March, Britain’s Prime Minister signed a letter triggering the two-year process for leaving the European Union (EU). Though the negotiations will cover almost every aspect of British life, one issue affects our industry more than any other. Customs

The huge issue’s not whether Britain can agree a free trade deal with the EU, or the status of migrants. It’s one that senior British politicians have so far refused refuse to discuss, and that 99.9% of the British population regards as so boring, they can’t believe we even want to discuss it.

Customs procedures – and the facilities to support them

On almost every issue under negotiation over the next two years, the outcome is unclear. But one almost certainly isn’t:

On or about 1 April 2019 all goods entering the UK from Europe will be liable to Customs inspection. Whether or not the UK agrees a free trade deal with the EU.

There’s huge misunderstanding about this problem.
Mrs May’s letter said she wanted a “bold and ambitious Free Trade Agreement between the United Kingdom and the European Union.” But it also repeated that “the United Kingdom does not seek membership of the Single Market.”
And once outside the Single Market, trucks delivering clothes from Europe will have to go through a Customs post as they enter the UK. Just as trucks entering the EU from the UK will have to go through a Customs post on entering France, Belgium or the Irish Republic.
The UK says it is committed to “frictionless” border controls. Her Majesty’s Commissioners of Revenue and Customs (HMRC) has a programme for pre-filing Customs documents that it plans to implement before Brexit software, and says it will minimise the number of imports stopped for inspection.
But the head of a UK Parliamentary committee said on March 31 that “confidence had collapsed” in Britain’s having essential Customs IT infrastructure ready on time.
Even the most efficiently managed border procedures require four things before these are introduced:

• Properly trained users;
• Efficient identification of consignments that need physical inspection;
• Adequate staff trained to manage inspections efficiently;
• Adequate space for inspections, and for trucks waiting inspection.

No-one in power has even begun to take this seriously.

The scope of the problem

Today, the UK’s foreign trade is unusual in two rarely-appreciated ways:

• Most of it isn’t subject to UK Customs control at all. Just 10% of the garments imported into the UK in 2016 were made in other EU countries. But that 10% represented 30% of the cash value of UK apparel imports. Buyers pay a premium for EU garments because they move from factory to shopfloor so quickly.
• A surprising amount gets Customs clearance before arriving in the UK. Not just the 10% of apparel imports from EU neighbours like Turkey and Morocco. But a large proportion of imports from China, Bangladesh and other Asian nations are cleared in Antwerp, Rotterdam, Bremen or other North Sea ports – or airfreighted into Inditex’s Spanish global hub – and then trucked into the UK without further inspection. They too will need Customs clearance in the UK from 2019.

Today, across the whole of the UK’s imports, about 50m commercial consignments a year are subject to UK Customs control. A few million get inspected.
The UK government expects that from 2019, around 390m will be subject to control – and HMRC expects between 5% and 10% will need inspection. That’s up to 40m inspections a year – possibly up to ten times the current number of commercial inspections.
On top of that, all imports and exports to and from the EU will need a full batch of documentation – which for many apparel importers, especially in fast fashion, will bring a set of requirements some staff will not have encountered before. Others will remember well how the frequently trivial discrepancies caused delays and extra work.

Current official plans

HMRC says its upgraded software will come on stream in January 2019 – which, even if the deadline is met and the system has the capacity to cope with initial demand – leaves frighteningly little time for training Customs staff, freight forwarders, suppliers and our own colleagues to use the system comfortably and accurately by the end of March.
There’s a disturbing silence about extra HMRC staff recruitment, facility extensions or provision for backlogs of trucks.
But in February, HMRC alerted Parliament, that Britain’s Infrastructure and Projects Authority had given the upgrade project an “amber or red” rating, meaning it is “in doubt”, with “major risks”.

The potential problems at UK Customs aren’t the only logistics-related worries.

• Whether French and Belgian Customs will be ready for post-Brexit is a whole different story – and for fast fashion businesses manufacturing in Europe and sending out raw materials, one that’s close to terrifying.
• There’s a huge question mark over work permits for non-UK drivers: over 80% of trucks delivering goods from the Continent to EU distribution centres are driven by non-UK citizens.
• The problems around conformance to the EU’s REACH system enter a new world of potential concern.
• And, with Mrs May threatening that “no deal is better than a bad deal,” there’s even the risk of negotiations collapsing, Britain walking out and barriers at Dover hitting us without properly agreed procedures.

What can the apparel industry do?

There are three things everyone in our trade should be doing. The first, to my mind is to carry on lobbying for Mrs May to drop her ridiculous commitment to leaving the Single Market – but many may argue it’s now too late for that. There’s no argument, however, about the other two.

Action 1: Lobby for a flexible exit from the Single Market

The UK resignation letter says: “In order to avoid any cliff-edge as we move from our current relationship…people and businesses in both the UK and the EU would benefit from implementation periods to adjust in a smooth and orderly way to new arrangements.”
That’s a more flexible approach than we’ve been hearing lately. The UK shouldn’t re-introduce Customs controls with the EU until there are adequate Customs facilities and procedures on both sides of the EU-UK borders.
Everyone in the trade should be lobbying their MP for that. We leave the EU – and risk hitting the chaos of under-resourced Customs – just 12 months before the next Parliamentary election. We should remind those Conservative and Labour MPs who insist on voting for inflexibility (practically all of them) that their jobs are on the line just as much as ours are. Don’t they keep insisting “we’re all in this together”?

Action 2: Hold the government’s feet to the fire on delivering an adequate Customs system in time for us to use it

The four essential requirements for efficiently managed border procedures post-Brexit can’t be negotiated, because failing to deliver them guarantees chaos, financial losses and destroyed jobs. Before Customs controls are re-introduced, the need for an efficient system with adequate Customs staffing and training, adequate space and time to train us ordinary users shouldn’t require discussion. But the UK government’s record on delivering big data projects is appalling – and we’re the people who’ll suffer if this is as overdue as it’s likely to be.

The UK government must immediately introduce quarterly progress reports, audited by independent inspectors.