Brexit border trouble grows as key customs system hits limit

The situation is expected to cause further disruption to freight traffic

Trucks on the approach road to the Sevington Inland Border facility for customs clearance near Mersham, UK. Bloomberg

A key UK government customs system has been overwhelmed within weeks of Brexit and threatens to trigger more disruption as freight traffic increases.

Exporters say they are struggling to acquire transit documents, which allow goods to enter the European Union without delay, because of a shortage of agents with the authority to issue them.

Agents need to put up a financial guarantee, often backed by a bank, to cover any taxes or duties on the goods being moved — but they have almost all been committed.

“No one’s got any guarantees left,” said Peter Hayes, general manager at Carlton Freight, a Liverpool-based freight forwarder which shuttles products such as cars, machinery and chemicals between the UK and EU. “We’ve had to say no to hundreds of inquiries.”

Meanwhile, firms wanting to apply for a transit guarantee or increase the size of their existing one have struggled because of delays at Her Majesty’s Revenue and Customs, the government agency responsible.

One hauler, speaking on condition of anonymity, complained it applied months ago, anticipating a surge in demand because of Brexit, but is yet to receive a response from the tax authority.

HMRC said it is aware of the problems applicants are facing and is conducting an urgent review. In a statement, it blamed delays on a recent software upgrade to its New Computerised Transit System. It also said it is currently processing 230 applications for transit guarantees, and expects them to be completed within a week.

The EU is Britain’s single-largest trading partner, taking 43 per cent of exports in 2019.

Prior to Brexit, the overwhelming majority of goods didn’t require transit forms, allowing them to be shipped to the bloc with minimal disruption.

Now firms are facing days-long delays to cross the border because of incorrect or missing paperwork.

At Ashford, south-east England, drivers have had to wait at a truck park for hours to obtain their transit documents and are regularly being turned back, according to Steve Cock of The Custom House, which has a base at the site and a £200 million ($273 million) transit guarantee.

He expects chaos as soon as freight traffic rebounds from its current subdued level because as much as 90 per cent of goods being moved will need transit documents. “They just can’t cope,” he said.

The transit problem is one of several issues snarling up UK-EU trade. DHL Express, owned by Deutsche Post AG, this week said it was temporarily suspending business-to-consumer shipments that required animal or plant health certificates. DB Schenker, a major German logistics group, has also temporarily suspended shipments due to Brexit.

Ben Moore, managing director of Sealite (UK) Ltd, which exports millions of pounds of LED lights to the EU each year, has had shipments held up by customs officials for days, one because it wasn’t accompanied by a transit document known as a T1 form.

“We don’t even know what it is,” Mr Moore said. “My shipping agent is saying ‘we can’t give you one.’”

He says he expects annual sales will drop by 25 per cent to £8 million because his EU customers, among them French industrial giant Schneider Electric SE and Swiss engineering group ABB Ltd, will go elsewhere.

Jon Swallow, co-founder of Jordon Freight, said his customs broker’s £1.5 million transit guarantee was used up within three days of Brexit.

There is a workaround — which involves setting up a fiscal representative in the EU country where a shipment first arrives and paying duties on entry — but this is an added expense and bureaucratic hassle that firms will want to avoid, Mr Swallow said.

With red tape restricting trade between the UK and EU, about 20 per cent of UK small and medium-sized enterprises have suspended exports to the EU, according to research by accounting firm UHY Hacker Young.

“Exports have just ground to a halt,” Mr Swallow said. “The people who are suffering are the SMEs.”

Thousands of trailer loads destined for the EU will be held up in the coming weeks due to the transit shortage and exports risk coming to a standstill, said Tony Shally, managing director of Espace Europe, a road freight company that moves goods between Britain and the EU.

Mr Shally wrote to Cabinet Office minister Michael Gove highlighting the problem and proposing that exporters are given a short-term 20,000 pounds transit guarantee without the need for backing by a bank.

“Our experience over the last two weeks has been horrendous,” Mr Shally said in the letter. “The situation will only get worse.”