Guidance for U.S. Exporters Navigating a Brexit Vacuum
Brexit has presented many exporters with a host of new headaches to confront and many of these exporters are reaching out to learn what to expect when bringing goods to UK and European markets following the introduction of hard borders between the UK and Europe for the first time in decades.
For US exporters whose goods are bound for the UK and Europe, there is some practical information that can be put into place now, as well as some waiting to be done while new post-Brexit trading regimes fully materialize.
The first thing that should be kept in mind for US exporters is that post-Brexit, any goods entering both jurisdictions (i.e, goods exported to the UK then onward into the EU) will be subject to significant new trade friction. The new hard border between the UK and EU will result in increased delays, more complex logistical operations and inspections – all of which are going to lead inevitably to increased transportation costs.
Although for many years the UK has served as a traditional redistribution hub into the EU for North American exporters, this picture has now changed. Currently, UK-EU trade relations are governed by a currently incomplete Trade and Cooperation Agreement (TCA). While the TCA is helpful in some circumstances, it is important to keep in mind that the TCA is a mere traditional free trade agreement and does not replicate the EU single market. As many exporters know, the EU single market’s overarching goal was the elimination of all trade friction between member states – of course the UK no longer enjoys this benefit as a non-member. In fact, many small and medium-size enterprises (SMEs) have simply abandoned cross-border trade between the UK and EU since Brexit.
US exporters can side-step these issues by going directly to their destined markets. While this may take some front-end logistics work, avoiding the UK-EU border is likely to be the best strategy for US exporters going forward. For EU-bound goods, US exporters should consider direct routes into Europe (the Netherlands is an excellent option here, with Rotterdam as a major European hub, to take just one example).
Some exporters have also found Northern Ireland to be a helpful loophole for easy access to both the wider UK and Europe – however this loophole is likely to close in the near future. It is not advisable to base an export strategy on this option without plans in place to switch gears on short notice.
With that said, US exporters should note that for direct trade, either US-Europe or US-UK, Brexit is unlikely to have major implications. In particular, it is likely that US-UK trade will improve as the UK seeks to expand its trading capacity with North America.
Lastly, US exporters doing business in the UK and EU should continue to monitor the Trade and Cooperation Agreement negotiations between the UK and Europe, as the TCA is still very much a working document.
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