The Portuguese shoe industry association, Apiccaps, has posted a useful guide on the website of World Footwear with practical checklists for shoe exporters and importers on how to deal with the new trade agreement between the U.K. and the European Union. It also organized a few days ago an interesting two-hour webinar on the issue, and its recording is now available online. Top officials of the British Footwear Association (BFA) and the Confederation of the European Footwear Industry (CEC) participated in the conference along with legal and trade experts.
Under the new trade regulations, a declaration on the origin of the product is required by customs on both sides of the border, and this can be a nightmare for the importer. For many shoemakers, one of the biggest problems caused by Brexit is a new obligation to pay double duties on goods passing the border between the EU and the U.K. that were mainly or wholly manufactured in China and other third countries. In many cases, they were previously imported into the EU for consumption anywhere in the EU, including the U.K., to take advantage of the economies of scale provided by the Single Market.
The importer in the U.K. will not have to pay any import duties if all the components of the shoe have been made and assembled in the EU. It will have to do so, however, if the upper of the shoe has been manufactured outside the EU and imported into the EU, paying duty on the product, for subsequent assembly in Italy, Spain or another country in the EU.
The use of a bonded warehouse can help get around this kind of problems, but this will be difficult and excessively costly for small companies that only sell minimal quantities in the U.K. It should be easier in the future to deal with products originating in Vietnam, as both the EU and the U.K. have signed free trade agreements with that country, which has been boosting its footwear production.
Besides the payment of extra duties in some cases, importers on both sides of the EU-U.K. border have been confronted with extra charges for the related paperwork required by customs authorities in terms of import duties and value-added tax (VAT). The job is often delegated to the freight forwarder, involving additional charges. It has been calculated that the total extra charges may jack up the cost of the product by about 20 percent.
Big problems have been faced by British manufacturers in dealing with clients in the EU, especially those in the Republic of Ireland, and this has led some of them to lose some business. While U.K. imports of footwear from the EU declined by 10.4 percent last year, with the biggest volumes coming from Italy and Belgium, U.K. exports to the EU fell by 16.6 percent. They have shown a certain recovery since February, and Carmen Arias, who heads up CEC, feels that trade between the two entities will gradually return to former levels.
Robert Perkins, chairman of the BFA, said that the disruption caused by Brexit, recently aggravated by Covid-19 and the shortage of containers, has led many shoe companies to “explore near-shoring” for greater “agility” in the supply chain.
Working with the new U.K.-EU trade regulations has been a tough learning experience, especially for companies that did not sell many goods outside the EU before Brexit. In many cases, they did not use the correct customs tariff codes, for example. It has been easier for companies operating on a wider scale. Joana Vaz Texeira, editor of World Footwear, said that it’s just a matter of getting used to the new paperwork, noting that it is simpler than exporting shoes to Japan, for example.
As already reported in Shoe Intelligence, the new paperwork has led some companies and their carriers to delay shipments across the British border.
For British shoe importers and retailers, the nuisance from Brexit has added up to the damage suffered from the protracted Covid-related lockdowns, which caused footwear sales to drop by an estimated 50 percent in January and 45 percent in February this year, as compared to a year earlier, according to the BFA.
Last year, during the first wave of the pandemic, British shoe retailers already had to cope with sales declines of 35 percent in February and more than 60 percent in April and May. While digital sales have grown sharply because of the lockdowns, the situation has been “horrendous” for online retailers as well because it has been very hard for them to cope with the extra demand, Perkins noted.
It has also been very difficult for e-tailers to set the right prices for end customers on the other side of the border, as different VAT rates are payable by them in different countries. U.K. retailers have had to register their business in various EU member states to avoid any extra charges for the customer. It will be easier after July 1, when the seller’s country will collect the VAT and then pay it to the tax authorities of the country were the customer is located.
The application of different safety standards for personal protection equipment (PPE), including safety shoes, will be an additional hassle from Jan. 1 of next year. A British certification body will have to issue a UKCA mark for the product if it is to be sold in the U.K. instead of the CE mark that has been used until now throughout the EU.