After a bumpy year, the EU and the UK started 2021 with a last-minute Brexit deal. A deal, that challenges the logistics industry.
While 2020 ended with the skin on its teeth, the new year starts straight into the third pandemic wave. The pandemic that began last year has had an immense impact on lives, international trade, and global economics; the full consequences of which will keep us company this year as well.
Global lockdowns led to permanent changes within the logistics industry. The increasing demand for essential services provoked several supply chain breakdowns.
Europe ended 2020 with increasing rollovers and, therefore, high delays within the supply chain. The last-minute Brexit deal and a sudden border closure just days before Christmas caused unforeseen chaos and uncertainty for shippers, carriers, and forwarders.
Covid-19 provokes numerous rollovers in Europe
The impact of COVID-19 has been felt by nearly everyone in the value chain. After a stable increase in global trade in 2019, the pandemic provoked a change in the international market’s consumption patterns. The low demand spiked after the first wave and reached a record high shortly after. Presenting a sudden challenge to the supply chain industry.
Many container lines grounded in the first half of 2020. Afterward, the maritime industry experienced a steep increase in demand for imported goods. Especially on the Asia-Europe and Transpacific lanes. Due to the rising demand, freight rates doubled within a short time. Carriers exported from Asia to the US or Europe struggled to get their empty boxes back, which led increasingly to rollovers in the last quarter of 2020.
The significant box shortage put pressure on operations and freight rates. However, almost the entire global fleet was already in use. That made it impossible to boost the shipping capacity with more vessels. The exhaustion of maximum capacity reflects in rising rollovers in Europe. This situation led to losses for forwarders, but overall for shippers, as disruptions translate directly into customer satisfaction.
Covid, Brexit, and the UK
Besides the logistics challenges due to COVID-19, the UK faced a rocky end of 2020.
A sudden border closure days before Christmas led to a standstill between the UK and the European mainland borders. Thousands of trucks with fresh food supplies were trapped on the road. On the 22nd of December, 48 hours later, trucks rolled again. However, the massive cargo waste was a hard setback with a looming no-deal Brexit hanging over the heads.
On the 24th of December, a last-minute agreement was made between the UK and the EU. Just one week before the Brexit deadline. The deal is called “The UK/EU Trade and Cooperation Agreement”.
Main points in the deal
Rules on goods originating from the UK and the EU
Goods that originate in the UK and the EU are allowed free movement across borders. However, the import and export of certain live animals and animal goods have been restricted. Any other trade, where products aren’t locally produced, will undergo similar restrictions as the ones in the EU/Canada agreement.
New customs processes
With the new Brexit deal, companies now have to make customs declarations. That’s both when importing and exporting goods in the UK and the EU. Shippers will need documents such as a…
- commercial invoice,
- packing list,
- certificate of origin,
- and import license for certain goods.
It’s also important that the cargo is cleared for export and declared for import in the other country.
A grace period
Companies have long asked for a grace period. A time that’d give them a chance to get a grip on the new workload that comes with the customs processes. And a grace period they’ve gotten on the ‘rules of origin’ paperwork. Until January 2022, companies don’t have to prove that their products are made locally. Easing up on the new administrative burden.
The real impact for shippers and stakeholders importing and exporting goods from or to the UK is yet to be seen. Shippers can take a deep breath with the news of no tariffs on goods originating from the UK or Europe. However, after the grace period, shippers will need to declare the origin of goods on all cargo.
The future of the Shipping industry in the UK and Europe
Facing the third wave of COVID-19 at the beginning of 2021, the pandemic and its consequences are far from over. These changes require a dynamic supply chain industry, that reacts appropriately to the changing market. Varying consumption patterns will determine how supply chain factors like packaging and shipping capacity will be impacted. The maritime industry is under pressure to revise its practices and adapt to new technologies. The past year has shown, that flexibility and digitalization are the way forward for the industry.
On the other hand, the new Brexit regulations will set significant hurdles for both European and global trade. However, there are things, the last-minute deal between the UK and the EU hasn’t changed. Shippers still have to deal with more paperwork, certification, and border controls than before. For trading goods from outside Europe, shippers will have to deal with increasing tariffs and taxes. If and how smaller businesses will cope with this new expense remains to be seen.
It will take a long time until the global trade and economy will return to a somewhat normal level. The need for collaboration between stakeholders has never been as critical as now to guarantee flexible and sustainable business operations.
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