The Unforeseen Cost of Brexit – Customs

Abstract

“Take back control” was one of the Leave campaign’s main battle cries in Britain’s referendum on EU membership. But reintroducing customs controls on UK-EU trade will have a cost for both business and government. Although it is not yet clear what Brexit will look like, the added costs from trade-related red tape that will result from leaving the EU are certain. And these costs are likely to be significant without adequate reform to customs procedures. At present, all goods entering the UK from outside the EU require an import declaration. The most common and practical way of complying is to use the logistics providers carrying the goods as agents. Their fees are often dependent on the specific commercial arrangements, but can range from just a few pounds to £25 plus for declaring a sea container. Once Brexit is in place, UK-EU trade will be subject to similar costs. According to the World Customs Organisation’s latest Annual Report for 2015-16, the UK made 70.5m import declarations and 6.5m export declarations per year. Based on current trade figures it would be fair for UK Customs (HMRC) to expect the number of customs declarations to double once Britain leaves the EU. A corresponding increase in declarations would also arise on the continent since each export declaration at one end of the supply chain is followed by an import declaration at the other. Further analysis is required, but it is easy to imagine an additional cost to UK-EU trade in the order of several billion pounds per year. Then there is also the risk of physical inspections. Depending on the nature and duration of the inspection, these costs could be anywhere between £52 and £1,540 per consignment. Ports would need to accommodate the increased demands for inspection facilities. This would be at the expense of losing valuable space for commercial activities.