Brexit Impacts for US Export Shipments Beginning January 1, 2021

Brexit Impacts for US Export Shipments Beginning January 1, 2021

In today’s world, it’s easy to think about all that goes into shipping analytics tools, business intelligence and advanced analytics. However, those execution capabilities, built for all modes, including parcel, are still left to the whims of global trade regulations. As reported by Alistair MacDonald via The Wall Street Journal, The U.K. and EU said Thursday they had signed an agreement over their future relations, setting the seal on the 2016 British referendum decision to leave the bloc. That was a relief for businesses that feared four years of politically charged negotiations could end without a trade pact, resulting in tariffs on goods for both sides.

But despite the reprieve, for the first time in almost half a century, food, motor vehicles and other goods moving between the EU and U.K. will from Jan. 1 face customs checks and need to meet separate sets of standards and regulations.” As a result, shippers need to know how the new regulations will affect US export shipments starting on January 1, 2021.

What’s the Degree of Change Under the New Trade Deal

Under the new regulations, food, motor vehicles, and other goods will face additional customs declarations to the tune of 215 million more annually. While that may not necessarily be extreme, it does represent a massive infusion of processes into the typical trade cycle. The customs declarations applies to US export shipments coming into the UK as well. 

While the UK consists of England, Scotland, Wales and Northern Ireland, Northern Ireland will continue to follow existing EU trade rulesets, says FedEx.

Will the Trade Deal Result in New VAT Charges

It’s important to realize that the current trade deal signed only days ago is between the UK and the EU, not the UK and the US. Yes, the trade deal did allow companies to escape the prospect of a new value-added tax (VAT) between EU and UK shipments. Unfortunately, the US possesses no such trade deal, and the uncertainty is on track to continue growing until a new administration takes hold.

Until a new trade deal between the US and UK is signed, the assumption follows the World Trade Organization (WTO) rules, and the UK has also implemented a policy subjecting all other importers’ goods worth less than 15 GBP to a VAT. As a result, that means most US export shipments falling under this category will now be forced to pay the VAT for exports. But there’s a slight catch. If the GBP is less than 135, a supply VAT, rather than an import VAT, will become due. Thus, the seller takes on the burden of registering for and managing VAT payments. Transparency into the full process is the best way to reduce transportation costs for exports headed toward the UK.

What Should US Exporters Do Now

US exporters need to exercise caution. The time for a post-Brexit trade deal between the US and UK is narrowing. Since the changes surrounding the Low Value Consignment Relief (LVCR) replacement with a blanket VAT are going into effect, it’s imperative for companies to gain more transparency into international operations. For US exporters, that amounts to better management of documentation and visibility into US export shipments headed toward the UK. That’s why companies need to register for the VAT here today. Establishing an Importer of Record (IOR) is another critical step for enterprises to take. At the same time, automation in labeling, including anomaly detection and correction, tracking of invoices/taxes paid versus outstanding, and other data are critical factors in streamlining operations throughout the new era. 

Overcome the Barriers to Efficiency in US Export Shipments and Post-Brexit Worries With the Right Business Intelligence Software

Global supply chains braced for the uncertainty of a post-Brexit world. Yet the need to maintain trade with the UK implies a direct need to better manage all global operations. Part of the solution lies in future-proofing operations with the right software and technology. Intelligent Audit will help your enterprise recognize the limitations and navigate regulation nuances of this new world. Request a consultation with Intelligent Audit to get started on your post-Brexit strategy now.

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