One year on—Trade in goods between Great Britain and the European Union Contents

Chapter 3: The TCA and the end of the transition period: impact to date


39.Although the TCA allows for goods to be traded between Great Britain and the EU without tariffs,38 traders have faced significant non-tariff barriers since it came into force on 1 January 2021. The November 2021 report from the NAO states that, “as a result of leaving the EU Single Market and customs union, businesses face additional burdens, which will increase further as full import controls are phased in.”39

40.There was a strong consensus among our witnesses that the new requirements had made GB-EU trade in goods more difficult. Dr Anna Jerzewska of Trade and Borders summarised the position succinctly: “it is now more expensive and more complicated to trade with the EU, both ways”.40 Indeed, certain business groups warned us that the new requirements risked discouraging GB-EU trade in both directions, particularly for small businesses. William Bain of the British Chambers of Commerce said that these new non-tariff barriers “have acted as major disincentives to cross-border trade that simply were not there before 1 January”.41

41.Emma Churchill from the Cabinet Office acknowledged that the TCA “meant major changes for those who are moving goods in and out of the country.”42 She did, however, stress that the “reasonable worst-case scenario” that the Government prepared for had not materialised—a point which was also highlighted in evidence we received from business groups.43

42.The verdict of the NAO was that, in “a very challenging set of circumstances”, it was “a significant achievement” by the Government and third parties to collectively deliver “the initial operating capability needed at the GB–EU border.” They added, however, that “this capability was achieved in part using temporary measures”, such as delaying import controls, implementing other easements, and providing financial support.44

43.The Paymaster General, Michael Ellis MP, told us that “thanks to the excellent work” done in preparation for the end of the transition period, “the situation was a very satisfactory one”, though he added, “that does not mean that there are no issues … these are systemic changes”.45 The Minister believed, however, that the “initial outlay of cost in order to help businesses acclimatise” would ultimately be recovered by the “myriad opportunities” of Brexit.46

Adjusting to the new trading landscape

44.It became clear during this inquiry that some of the problems experienced in the first few months of 2021 had subsided, as businesses adjusted to the new trading landscape. Logistics UK, for example, told us that as businesses had acquired more experience, “some of the issues that were labelled as ‘teething problems’ subsided during the first quarter of the year.”47

45.Equally, however, it was clear that this adjustment could only go so far. Several witnesses drew a distinction between short-term ‘teething’ problems related to readiness, which had largely passed, and long-term ongoing costs, which had not.48

46.Logistics UK emphasised that these long-term costs “won’t be eliminated with time or experience”,49 as they are “part of the new post-Brexit trading landscape with the EU”.50 The Institute of Directors, citing member survey data, told us that 68% of businesses surveyed in September 2021 said they had experienced increased costs in trading with the EU, somewhat down on the corresponding figure for January 2021 (79%).51

47.Some witnesses also stressed that it was still too early to fully judge the impact of the end of the transition period, as the delays to the introduction of GB import controls on EU goods (see Chapters 4 and 5) meant that GB-EU trade was “not yet at a steady state”.52

48.The Government’s characterisation of the degree of adjustment was similar. Emma Churchill said that there was “no doubt” that there had been “a whole range of what you might call teething problems” in January, and that the Government had “worked very intensively” to address these. She added, however, that some businesses had “continued to face challenges”, and that these were “certainly connected to the new processes that are new requirements under the new system”.53

The varying impact on different businesses

49.We also heard that the impact of the end of the transition period and the TCA on different businesses had varied considerably. Joe Marshall summarised this as follows: “The impact varies a lot between firms based on the sector they are in, their size, their experience of… [non-EU] trade previously and how much they have been exposed to some of the COVID and supply chain disruption.”54

50.It became clear that smaller businesses had generally fared worse. James Sibley of the Federation of Small Businesses said that trading under the TCA had been “very challenging” for smaller firms, citing survey data that “about a fifth of our members who export to the EU, or previously exported to the EU, have stopped that activity since the beginning of this year.”55

51.Smaller businesses had also, we heard, been slower than larger businesses in adjusting to the TCA.56 James Sibley stressed that the impact on SMEs had varied, as “the micro and small end of the SME spectrum quite often lacks the resource to make the necessary adjustments”, whereas “businesses more at the medium end … seem more able to adjust”.57

52.We also heard significant evidence of variations between sectors, with the agri-food sector among the hardest hit due to the new Sanitary and Phytosanitary (SPS) requirements (discussed in further detail in paragraphs 67–80). Luke Hindlaugh, Senior EU and International Trade Executive at the Food and Drink Federation, said that these changes had been “disruptive” for the food and drink sector.58

53.The impact to date has varied within sectors too. For the food and drink sector, we heard that trade with the EU in alcohol and other high-value, non-perishable products had remained strong, whereas “the biggest impact has been … those animal products that are either low margin or fresh, or just simply a bit more complicated.”59 Luke Hindlaugh gave the example of exporting lasagne, where “you might have anywhere between six and nine different products of animal origin in it that you have to trace back.”60 HMRC trade statistics, highlighted to us by the Food and Drink Federation, show significant variation in trade flows for different food exports to the EU.61

54.Similarly, we heard of specific issues in the fish sector.62 Richard Ballantyne, Chief Executive of the British Ports Association, explained: “some 80% of the fish we land are exported. The vast majority of that is exported to … Europe by truck, and we have seen a big impact on that sector with the introduction of new controls on arrival into European ports”.63

55.Dr Anna Jerzewska told us that she had heard “a very broad spectrum of responses” from businesses, ranging (even within the same sector) from no longer being able to trade to not being affected at all, though she stressed that “the side of the spectrum that is having difficulties … is much larger.”64 She added that for some businesses, additional costs were “quite easy to absorb,” whereas for others “that cost might be difficult to absorb, and in this case you can either pass it on to someone [else] … or you can change your business model.”65

56.The Government also acknowledged the varying impact of the new requirements. The Paymaster General accepted that “there are challenges for some SMEs.”66 Emma Churchill also told us that “it is clear that agri-food and the fish sector had more administrative changes to the processes that they needed to go through”.67

57.Since the agreement of the TCA and the end of the transition period, businesses trading goods between Great Britain and the EU have faced challenges as a result of new non-tariff barriers. Although the worst-case scenario of widespread disruption did not come to pass, GB-EU trade in goods is now more complicated and expensive than it was before January 2021.

58.There has been some business adjustment to the new trading landscape as the year has progressed, with initial ‘teething problems’ subsiding. Nevertheless, traders continue to experience challenges and costs. In many cases these appear to be inherent in the new relationship with the EU and are, therefore, unlikely to be entirely eliminated with more time or experience, although they may be absorbed, passed on to consumers, or diminished.

59.The impact of the new trade barriers on business has been uneven. Smaller businesses, which often lack the resources to adjust to new costs, and the agri-food sector, which faces an additional set of trade barriers in the form of SPS requirements, have been particularly hard hit. Any additional Government support for business must take this uneven impact into account.

Rules of origin

60.Tariff-free trade from one country or bloc to another is conditional on a traded product meeting rules of origin, a complex set of criteria which establish a product’s ‘economic nationality’. The TCA includes both general provisions applying to all products, and product-specific rules of origin.68 Rules of origin define and establish thresholds for ‘local content’. Products which do not meet the ‘local content’ thresholds—for instance, products assembled in the UK that are substantially made up of components originating in a third country—face tariffs on export to the EU.69 70

61.Under the TCA, compliance with rules of origin can be proven in one of two ways:

Concerns and adjustments

62.As Sophie Dean, Director General of Trade and Borders at HMRC told us, rules of origin have “an inherent level of complexity”.71 The Federation of Small Businesses told us that the administrative requirements associated with rules of origin “can often be beyond the capabilities of smaller firms”.72 In its March 2021 report, the EU Goods Sub-Committee had concluded that rules of origin were “among the biggest issues facing traders following the TCA’s implementation”.73

63.Our inquiry received some evidence that rules of origin continue to present difficulties for firms.74 Competere, a trade law and economic consultancy, said that rules of origin were causing “trader issues”, adding that the non-qualification of some goods for tariff-free treatment “significantly lessens the value of the TCA”.75

64.Other witnesses characterised rules of origin as something which had caused major problems early on but to which firms had now somewhat adjusted.76 In particular, witnesses referred to the issue of goods imported from the EU, stored at distribution hubs in GB, and then re-exported to the EU–commonly to Ireland. These goods often do not meet the processing requirements required to qualify as originating from the UK, and therefore risk tariffs on re-export.77 William Bain said that, in adjusting to this problem, “companies have … had to look at offshoring some of their distribution functions into the European Union in order to avoid tariffs.”78

65.Overall, the biggest set of concerns we heard on rules of origin related to the imminent expiry of the grace period for suppliers’ declarations on 1 January 2022. This is outlined in further detail in Chapter 5.

66.Rules of origin are an important part of any free trade agreement as they allow a trader to claim tariff-free access, and have an inherent level of complexity. Although the TCA’s rules of origin requirements posed a significant challenge for traders at the start of the year, there is some evidence that businesses have since been able to adjust to them, for example by absorbing the costs or by moving aspects of their distribution infrastructure to the EU. However, with the expiry of the grace period for suppliers’ declarations on 1 January 2022 fast approaching, we are concerned that there may be a further wave of short-term difficulties in this area in the new year.

Sanitary and Phytosanitary (SPS) requirements

67.As a result of the UK’s departure from the Single Market, GB-EU trade in food and other products of animal or plant origin is subject to a series of Sanitary and Phytosanitary (SPS) requirements, which may include health inspections, certification requirements and physical checks at the border. Sam Lowe of the Centre for European Reform told us that the reason SPS controls are generally “so intrusive” and “nearly always happen at the border” is because of the unique risks associated with these types of product: “you are guarding against pestilence and disease.”79

68.Both the former EU Goods Sub-Committee and the former EU Environment Sub-Committee heard evidence at the start of 2021 that the TCA’s SPS provisions do very little to minimise trade friction compared to a ‘No Deal’ scenario.80 Similarly, Elly Darkin of Global Counsel told our inquiry that the outsized impact of the TCA in the agri-food sector (discussed in paragraphs 52-54 above) was a “direct consequence of the UK falling outside the EU’s SPS region without any deal to provide a mutual recognition or equivalence framework.”81

69.So far, these requirements have been more stringent for GB exports to the EU than for imports from the EU into GB, due to the UK’s decision to delay the introduction of many SPS requirements until January and July 2022 (see Chapters 4 and 5). However, some UK SPS requirements have applied to imports from the EU since January 2021, particularly on products deemed to be ‘high-risk’.82

General concerns

70.Witnesses stressed the complex and onerous nature of current SPS controls on GB exports into the EU. Luke Hindlaugh described the requirements as “very time-consuming and resource-intensive”, adding, “just going through the documentary ID and physical checks at Border Control Posts adds time and complexity and it makes your exports less competitive”.83 Overall, SPS requirements were “overwhelmingly the biggest issue” for members of the Food and Drink Federation.84

71.Similarly, the Horticultural Trades Association, which represents the UK gardening industry, told us that “red tape and barriers to trade” were making their members “less competitive and less efficient”. By way of example, they said that “to buy and sell plants from the EU into Great Britain it now takes a business 60 steps to get that plant across the border, when previously it was 27.”85 For the National Farmers’ Union, high levels of physical checks on GB meat exports had caused “very lengthy delays to perishable products”.86

72.While EU SPS controls apply to most third countries, we heard from the National Farmers’ Union that the nature of the existing trading relationship meant the UK was uniquely exposed to additional trade friction compared to other countries:

“We are trading with our closest neighbours in high volumes and value perishable fresh products … Most trading systems, and the focus of EU rules in particular, are set up for shipments of frozen product arriving in containers. UK agri-food trade centres on perishable product using high speed roll-on/roll-off ferries, where it is not feasible for consignments to sit around waiting for hours or days to clear border procedures.”87

Specific concerns

73.Particular concerns were raised over the difficulties in processing Export Health Certificates (EHCs), official documents which are required to export live animals or animal products from Great Britain to the EU.88 The National Farmers’ Union also added that the requirement to submit hard copies of EHCs exacerbated the administrative burden further, and called on the Government to develop a “fully digital system” for EHCs in conjunction with the EU.89 The Paymaster General informed us that electronic certification had been explored in discussions with the EU on the Trade Specialised Committee on Sanitary and Phytosanitary Measures.90

74.The costs of these additional requirements can make certain export practices economically unviable, forcing companies to adapt. The Horticultural Trades Association gave the following example:

“To send even the smallest packet of sunflower seeds to customers in the EU, businesses now have to obtain a phytosanitary certificate … This costs a minimum of £50 to obtain a certificate, plus all the other costs of export, … [meaning] that a £2 packet of seeds costs over £100 to send. As this is not commercially viable, many companies have either stopped exporting small quantities, or send them over in bulk to the EU and then adding a distribution centre into the supply chain to handle getting the product direct to the customer.”91

Potential solutions

75.A number of witnesses expressed a strong preference for a further agreement between the UK and the EU to streamline SPS requirements. Two potential precedents were highlighted: a ‘Swiss-style’ agreement based on alignment, which “would see the UK effectively move into the EU Sanitary and Phytosanitary territory”, or a ‘New Zealand-style’ agreement based on equivalence, which would “reduce the frequency of physical inspections but not remove the need for identity checks or document checks”.92

76.It should be noted that the merits of these two distinct options have been well-rehearsed, including in past negotiations between the UK and the EU (both in the context of the TCA and in the context of the implementation of the Protocol on Ireland/Northern Ireland).93 The differences between the two sides on this matter (with the UK favouring the ‘New Zealand-style’ approach and the EU the ‘Swiss-style’ approach) have, to date, not been resolved.94

77.While aware of this dichotomy, those witnesses who called for an SPS agreement did not seem to express a strong preference either way, though they did note that the ‘Swiss-style’ model “presents red lines for the UK Government”.95 William Bain said that the British Chambers of Commerce’ top priority for negotiated improvements on trade in goods was “some form of veterinary agreement”, whether based on equivalence or alignment.96 Luke Hindlaugh said that “an SPS equivalence deal … would help massively”, and highlighted how the EU-New Zealand model would provide for both a reduction in physical checks and simplifications for EHCs.97 The National Farmers’ Union also called for the UK and EU to “continue negotiations… to simplify and streamline border procedures.”98

78.The Paymaster General was circumspect about the prospect of negotiating a further agreement in this area, explaining that, while “we will always be open to agreeing further arrangements”, for now “the key focus is on implementing the deal that we have just struck … and supporting industry to adjust to those changes.” He also stressed that “we are not going to trade our sovereignty for easier market access.”99

79.Sanitary and Phytosanitary (SPS) requirements have continued to present a major barrier to GB exports of agri-food products since the agreement of the TCA. The administrative complexity of these requirements is exacerbated by the perishable nature of many agri-food products, and the volume and nature of existing trade flows. As a result, GB exports of agri-food to the EU have become slower, less competitive, and more costly.

80.Unless the UK and the EU are able to reach a more comprehensive agreement, which will require flexibility on both sides, SPS checks and controls will continue to be a serious barrier to agri-food trade. Notwithstanding the long-standing and well-rehearsed differences between the Parties’ preferred outcomes in this area, we call on the UK Government to seek an agreement on SPS rules with the EU as an urgent priority. The Government should provide further detail on its efforts in this regard in their response to this report.


81.The UK is no longer in the EU customs union. Since 1 January 2021, traders from both Parties have been subject to certain customs formalities, such as filling in customs declarations. The TCA provides for some customs facilitations, as against the baseline for third country trade with the EU.100

82.Customs procedures are not standalone, often interacting with other requirements—for example, providing information on the origin of goods is one of the requirements when filling in customs declarations. In addition, Dr Anna Jerzewska pointed out that one key difference between customs formalities and other non-tariff barriers, such as SPS controls, is that “compliance with customs does not necessarily happen at the border … Most of it is done inland after goods have been imported.”101

83.As with SPS, customs requirements for GB-EU trade have been asymmetrical to date. Whereas the EU introduced full customs controls from the outset, the UK has permitted most traders to defer customs declarations (and with them, payment of import VAT and any tariffs) by up to 175 days after import.102 As discussed in Chapters 4 and 5, this temporary easement will end on 1 January 2022.

84.The existence of this easement has not prevented importers from having to deal with customs formalities altogether. Speaking for the Government, Lord Frost told us, “there is a sort of myth that we are not doing customs controls. We are doing them. What we are not doing is absolutely every aspect of them.”103 In any event, Joe Marshall said that “many firms have not been taking advantage” of the option to defer customs declarations and are already submitting full declarations.104

85.Customs formalities add a further layer of expense and complexity to GB-EU trade. James Sibley and Luke Hindlaugh both told us that the volume of paperwork, the data required to complete declarations, and the associated costs were a significant challenge for many businesses.105 The Federation of Small Businesses also raised separate concerns about “delays and increased costs associated with using fast parcel operators or intermediaries to ship goods between GB and EU.”106

Customs intermediaries

86.Because of the complexity of the customs regime, traders often seek the assistance of a specialist customs agent or intermediary in order to complete the necessary formalities—indeed, Sophie Dean informed us that “most businesses” use these intermediaries.107

87.In March 2021, the EU Goods Sub-Committee had concluded that the intermediary sector “does not have the capacity to meet increased demand.” Our inquiry heard some ongoing concerns in this area; ADS warned that some intermediaries “were turning away the business of new clients (particularly SMEs) owing to them reaching their capacity.”108 Hiring customs intermediaries is also an additional financial outlay, which smaller businesses may struggle to meet.109

88.Other witnesses, however, indicated that customs intermediary capacity had improved over time. Sarah Laouadi of Logistics UK said that intermediaries had indeed been “overloaded” at the start of the year but added that, “since January … we have not received the same degree of concern about intermediary capacity.”110

89.Sophie Dean told us that, in response to business concerns about customs intermediary capacity, the Government had set up grants to bolster the industry, as well as establishing a register of intermediaries on GOV.UK.111 This register allows intermediaries to highlight whether they have capacity to take on new clients, and whether they are willing to take on small businesses; Sophie Dean told us that “over 90%” of registered intermediaries had declared that the answer to both these questions was yes.112

Further customs facilitations

90.We heard some calls for further negotiated steps to reduce the burden of customs formalities. The Food and Drink Federation called for the Government and relevant EU Member States to “pilot or replicate at roll-on roll-off crossings the customs model that applies across the Norway and Sweden border”, explaining:113

“This [model] allows for a single customs office, that reduces the customs requirement … into a single submission of a customs declaration (rather than both an export and import declaration, as well as entry and exit summary declarations) … This would greatly reduce the customs documentation required and reduce the data duplication that currently exists on the import and export declaration.”114

91.We also heard from Competere that the TCA’s provisions on customs and trade facilitation “have not been fully explored and they should be fully explored”—and indeed, the TCA’s Specialised Committee on Customs Cooperation and Rules of Origin only met for the first time on 7 October 2021. Sophie Dean told us that, as of this first meeting, the UK and EU were discussing “how we can bring to life the facilitations that are possible.”115

92.New customs formalities have added additional complexity to GB-EU trade, which will increase further with the requirement for full customs declarations for imports from 1 January 2022. However, we received evidence that issues around customs intermediary capacity have improved since the start of the year, and we welcome the action the Government has taken in this area.

93.There are further steps the UK and EU could take to reduce the customs burden on traders through co-operation. We regret the fact that the TCA’s Specialised Committee on Customs Cooperation and Rules of Origin did not meet until October, and we urge the Government to utilise the platform that this forum provides to the fullest extent. In particular, this could include exploring with the EU the possibility of implementing a single customs office model, similar to that currently operational on the Norway/Sweden border (albeit within the context of the European Economic Area).


94.There is no explicit provision in the TCA for VAT charges,116 but the UK’s departure from the EU’s VAT area on 1 January has meant administrative changes for VAT on goods trade with the EU.117

95.The Federation of Small Businesses told us that for their members, “increased costs and administrative requirements that result from the UK leaving the EU VAT area are one of the biggest concerns for small businesses.”118 We heard that these concerns are particularly acute for e-commerce retailers and for those engaging in business-to-consumer sales.119

96.By far the biggest concern raised during our inquiry related to a change in EU rules on e-commerce, which came into force on 1 July 2021.120 The changes are as follows:

97.The Federation of Small Businesses told us that “in theory, IOSS should make the lives of SMEs exporting to the EU a lot easier”, particularly as it meant traders no longer needed to register in multiple EU Member States.122 They added, however, that the requirement for a fiscal representative was “prohibitively expensive for many small firms … both in administrative burden and securities paid towards VAT liability.”123 The British Chambers of Commerce raised similar concerns.124

98.Business groups said they would like to see the UK listed by the EU, as Norway has been, thus removing the requirement for traders to hire a fiscal representative in the EU. This change, we heard, “could be a game changer when it comes to VAT.”125

99.Sophie Dean told us that the issue of fiscal representatives were the most frequent business complaint in the VAT area, and that the Government was discussing the matter with the EU.126 In his letter to the Committee of 25 November, the Paymaster General explained the current state of play in these discussions: that the EU did not view the TCA’s VAT and Debt Protocol agreement as equivalent to the EU’s Mutual Assistance Recovery Directive; that the UK had therefore proposed amending the TCA VAT and Debt Protocol to resolve this; and that the EU had so far refused to do so.127

100.The recent change to EU rules on VAT has been a significant concern for smaller businesses and e-commerce retailers exporting into the EU, in particular the need to hire an EU fiscal representative when using the EU’s Import One-Stop Shop (IOSS).

101.We welcome the Government’s raising of these matters with the EU, and we urge them to continue to do so. Given the evidence we have received regarding the burden placed on small firms, we hope that the Government is successful in persuading the EU to adopt the same ‘listing’ approach to the UK as it has done with Norway, so that GB businesses can export goods via IOSS without a fiscal representative. We look forward to an update from the Government on this matter when it responds to this report.

Transporting goods

Market access

102.Under the TCA, road haulage access between the UK and the EU on a point-to-point basis is unlimited, with no permit requirements. UK lorries are limited to two laden journeys between different Member States (cross-trade) and one laden journey within a single Member State (cabotage).128 129 EU lorries may carry out two cabotage operations in the UK under the TCA.130

103.Logistics UK told us that these rules on market access “work reasonably well for general haulage companies”. However, they added that because of the limitations on cross-trade and cabotage, the TCA “[does not] offer any sustainable solution to UK touring companies carrying equipment on pan-European cultural tours”, such as performing musicians, where “the same load needs to be moved to different successive locations across Europe.” This, they said, “constitutes a gap in the TCA and requires a jointly agreed solution with the EU.”131

104.The Committee has previously highlighted the issue of haulage restrictions for touring as part of its separate work on the movement of creative professionals. In a letter to Lord Frost, dated 19 October 2021, the Committee warned that continued UK participation in the music haulage market is rendered “practically impossible” by the restrictions in the TCA, and highlighted the UK’s previous dominance of the European music haulage market, meaning that this is “not a sector in which the shortfall could be picked up by EU operators”. Committee correspondence with the Government on this matter is ongoing.132

105.Although the TCA’s provisions on road transport work well for most hauliers, they are wholly inadequate for those whose business model relies on the temporary movement of goods to multiple locations in the EU, particularly to large sections of the performing arts sector. We retain a close interest in this matter and intend to continue pursuing this in correspondence with the Government.


106.We also heard ongoing concerns about groupage—the transportation of multiple consignments of goods on a single lorry. As Logistics UK told us, these operations are “inherently complex as they require evidence of customs formalities for each consignment … One missing or incorrect document prevents the whole truck from being cleared.”133 Luke Hindlaugh told us that this is an issue that primarily affects smaller businesses, as groupage is “how most SMEs export; they do not have the volumes to be able to fill up lorries.”

107.We are concerned by the continuing issues that smaller businesses have faced with exporting via groupage. We invite the Government to set out how it intends to address this issue in their response to our report.

Guidance and support

108.The Government has produced extensive guidance seeking to help businesses navigate the new requirements introduced by the TCA and the end of the transition period.

109.We received mixed reviews from business groups about the quality of government guidance to date:

110.Government officials highlighted the recent launch of the Export Support Service, a new cross-department online and telephone helpline for exporting to the EU. Sophie Dean explained: “We had SMEs with questions on customs, and SMEs with questions on DEFRA and SPS, so we thought we could have an Export Support Service they can ring up and get a single answer, as a single first line of contact”.139 Business groups we heard from were optimistic that the Export Support Service might address the issue of uncoordinated guidance across departments.140

111.Emma Churchill also pointed us to a separate and new “smart guidance service” accessible to both importers and exporters, which was deployed in response to feedback about the difficulties in locating relevant guidance. She added, “we will keep getting feedback on it so that we can improve it.”141

112.Business feedback on government guidance to date has been mixed, with praise in some quarters but concerns over a lack of consistency and coordination between government departments. This may be a consequence of the diffuse and complex division of responsibilities across government departments.

113.We are encouraged, however, that the Government appears to be receptive to business feedback about improving its guidance and we hope that this continues. We particularly welcome the creation of the new Export Support Service as a single point of contact for exporters to the EU.

The SME Brexit Support Fund

114.The Government previously operated a £20m SME Brexit Support Fund, designed to help traders adjust to the new rules. SMEs whose only foreign trade was with the EU could apply for grants of up to £2,000 “to pay for practical support including training and professional advice”—for example, a customs intermediary to assist with completing customs declarations, as recommended by the Government. However, the Fund closed for applications on 30 June 2021 and has not since reopened.142

115.When asked why the Fund had been closed, Sophie Dean cited low take-up as the primary reason. Only £8.4m of the £20m pot had ultimately been spent, and decision to end the scheme was taken because “we had gone out to all the businesses that we could … and the applications were drying up”.143

116.Business groups, however, told us that the reason for this low take-up was that the Fund’s eligibility criteria were “much too narrow”. As the Fund was only open to businesses who traded solely with the EU, it “excluded businesses that had previously traded with countries outside the EU Single Market, even those that had exported on a very limited or ad hoc basis”—despite the fact that such businesses were “facing the same obstacles as other businesses when trading with the EU.”144 The Institute of Directors cited survey data showing that 87% of its members were either not eligible for the Fund or did not intend to apply.145

117.Both the Institute of Directors and the Federation of Small Businesses therefore called for the Fund to be reinstated, with wider eligibility criteria to “help small businesses access the relevant private sector expertise and training.”146

118.The Government closed its £20m SME Brexit Support Fund because of low take-up, but we heard that this reflected the Fund’s limited eligibility criteria, not low demand among small businesses. Our evidence suggests that SMEs have been disproportionately affected. We therefore recommend that the Government restore a version of the Support Fund, but with wider eligibility criteria, so that businesses who trade mostly but not entirely with the EU are also eligible. If the Government does not accept this recommendation, they should explain their reasoning when they respond to this report and, in doing so, outline the other steps they are taking to help small businesses access professional support.

EU Member State implementation of the TCA

119.There was general consensus among the witnesses that goods exported to the EU faced variable and inconsistent treatment across the Member States. Elly Darkin told us that “there is really no other topic that you can raise with UK businesses … that will get them as hot under the collar as the issue of variable treatment [by Member States].”147 Logistics UK agreed that for GB exporters, “the most persisting grievance is about the inconsistencies in how these requirements are applied by different EU countries.”148

120.These inconsistencies have significant consequences for businesses and consumers. As Sarah Laouadi explained, they resulted in “additional costs for UK exporters, and when those costs are not passed on … this can result in margin erosion for exporters”.149

121.By way of an anecdotal example, Sam Lowe cited Germany as “a country that [businesses] have the most problems with” due to “a very strict interpretation of the rules.” Additionally, the “food industry reports that there have been quite big SPS issues in Spain because … Spain checks everything at the border, including the labelling, whereas other countries will deal with that via market surveillance.”150

122.A further underlying reason for the difficulties that exporters face with the various Member States, as Sarah Laouadi explained, “is the diversity of different expectations coming into force all at the same time … combined with the novelty of those requirements at the beginning of the year.”151 As Luke Hindlaugh stated, “a lot of these processes are [not only] quite new for traders, they are new also for those enforcing them. A lot of ports have probably never done these checks before”.152

123.We did, however, hear evidence that the situation had improved. Luke Hindlaugh explained that “in the early days there were a lot of inconsistencies, which have gone away”, although there were still “different approaches to enforcement”.153

124.Sam Lowe argued that a degree of inconsistency was to be expected: “while the EU has shared customs rules, they are interpreted differently by different Member States, and this is true of imports from anywhere else in the world. It was true while the UK was a member [of the EU]”.154

125.There was little indication that the inconsistencies witnessed were either deliberate targeting of UK businesses or breaches of the TCA. For the Government, Lord Frost said that the inconsistencies were “certainly not characteristic”, and that he did “not think many, if any, countries are doing this as a matter of policy … it is more the way the rules get interpreted”.155 Similarly, Emma Churchill stressed that “it is not necessarily the case that if a Member State does something slightly differently it is outside the [TCA] framework.”156

126.A number of witnesses called for action to address the problem of inconsistencies across the Member States. Elly Darkin said that “If there is a genuine sense that there has been unjust treatment … the forum to take that up in is the TCA Specialised Committees … the UK Government need to engage seriously with those committees.”157 Representatives of individual Member States have the right to attend meetings of the Specialised Committees.158 Lord Frost agreed that “if UK companies are not being treated as they should be under the TCA” these matters would be taken to the Specialised Committees, but stressed that “we cannot do that for every single problem”.159 Emma Churchill explained that government officials met their counterparts in EU Member States regularly to address problems and would only take them to a Specialised Committee if it was a “really significant issue”.160

127.In addition to pursuing solutions through the TCA’s institutional structure, Elly Darkin also called for the Government to “develop a tool as a way for companies to report back in those instances of variable treatment” and to be “transparent about the fact that there is variable treatment at EU member state levels” to enable businesses to prepare.161 On this point, Emma Churchill suggested that the new Export Support Service would perform precisely these services, as it would “help with discussions with Member States … [and could] collect the kind of front-line intelligence that is coming from businesses and business representative organisations.”162

128.The Government’s support in this regard did not go unremarked. Joe Marshall told us that, “while the UK Government could not control” the issues exporters were facing with the various Member States, it deserved credit for “identifying those issues, raising them with the member state authorities, trying to work out what was going on and feeding back to firms on how they might be able to avoid some of those problems.”163

129.We received considerable evidence of inconsistent treatment of GB exports by authorities in different EU Member States, which has been a source of major frustration, uncertainty, and cost for businesses exporting goods to the EU. However, neither our witnesses nor the UK Government viewed these inconsistencies as being a targeted and deliberate policy, or a breach of the EU’s obligations under the TCA.

130.We welcome the ongoing work in government to identify these issues and raise them with the relevant Member States, including through the TCA Specialised Committees where necessary. We encourage them to continue this work.

131.We heard calls for further government action in this area, particularly by facilitating intelligence gathering and monitoring of instances of inconsistent treatment. In their response to this report, the Government should set out in detail the steps that they intend to take in this regard, including the role that the new Export Support Service will play in facilitating the monitoring of inconsistent treatment.

38 Provided that the TCA’s Rules of Origin criteria are met –see paragraphs 60–66.

39 National Audit Office, The UK border: Post UK-EU transition period (5 November 2021): [accessed 30 November 2021], p. 10

40 Q 33 and Q 35 (Dr Anna Jerzewska)

41 Q 16 (William Bain); see also written evidence from the Institute of Directors (TIG0007).

42 56 (Emma Churchill)

43 Q 56 (Emma Churchill); see also National Audit Office, The UK border: Post UK-EU transition period (5 November 2021), p. 9: [accessed 30 November 2021], Q 16 (William Bain); written evidence from Logistics UK (TIG0010).

44 National Audit Office, The UK border: Post UK-EU transition period (5 November 2021), p. 16: [accessed 8 December 2021]

45 Q 82 (Michael Ellis MP)

46 Q 82 (Michael Ellis MP)

47 Written evidence from Logistics UK (TIG0010); see also Q 33 (Sarah Laouadi), Q 35 (Dr Anna Jerzewska).

48 Q 2 (Joe Marshall); Q 31 (Luke Hindlaugh)

49 Written evidence from Logistics UK (TIG0010)

50 Q 33 (Sarah Laouadi); Q 4 (Sam Lowe)

51 Written evidence from the Institute of Directors (TIG0007)

52 Q 1 (Joe Marshall); see also Q 19 (Luke Hindlaugh).

53 Q 58 (Emma Churchill)

54 Q 1 (Joe Marshall); see also Q 1 (Elly Darkin).

55 4% of business respondents to the FSB’s survey said that they had stopped trading with the EU permanently, while another 17% said they had stopped doing so temporarily. A further 6% said that they had temporarily stopped trading with the EU in Q1 of 2021 but had resumed by Q3 of 2021. See Q 16 (James Sibley) and written evidence from the Federation of Small Businesses (TIG0017).

56 Q 17 (Luke Hindlaugh)

57 Q 17 (James Sibley)

58 Q 16 (Luke Hindlaugh); see also Q 1 (Elly Darkin); Q 17 (William Bain); written evidence from the Agricultural Industries Confederation (TIG0002).

59 Q 17 (Luke Hindlaugh); see also 1 (Sam Lowe).

60 Q 17 (Luke Hindlaugh)

61 Written evidence from the Food and Drink Federation (TIG0016)

62 Even within the fish sector, however, there are variations—exports to the EU of salmon, a high-value good that is often smoked and therefore less time-sensitive, increased by 50% in the period between January and August 2021 compared with the equivalent period in 2018. See written evidence from the Food and Drink Federation (TIG0016); see also Q 17 (Luke Hindlaugh).

63 Q 33 (Richard Ballantyne)

64 Q 34 (Dr Anna Jerzewska)

65 Q 35 (Dr Anna Jerzewska)

66 Q 82 (Michael Ellis MP)

67 56 (Emma Churchill)

68 A product can be considered ‘originating’, and thus eligible for zero tariffs, if it has been exclusively obtained or produced in the territory of one country, or if it has been substantially transformed (for example, through processing) in line with the relevant product-specific rule.

69 The World Trade Organization’s General Agreement on Tariffs and Trade establishes the ‘Most Favoured Nation’ (MFN) principle, which states that countries should not discriminate between partners (for example, by applying tariffs at differing levels) unless the countries in question have a free trade agreement or are in a customs union together. In the context of the TCA, the MFN principle means that non-originating goods face tariffs at the same level as goods from countries with which the UK and EU do not have a free trade agreement.

70 The Trade and Cooperation Agreement also allows for ‘full bilateral cumulation’, allowing the UK and EU to count inputs from the other Party when assessing origin. In simple terms, if raw materials or parts from the EU are imported into the UK, and then used to manufacture another product that is re-exported back into the EU, that product is deemed to have originated in the UK, and thus benefits from a zero tariff. However, this is subject to other relevant requirements, such as on processing (see paragraph 64).

71 Q 58 (Sophie Dean)

72 Written evidence from the Federation of Small Businesses (TIG0017)

73 European Union Committee, Beyond Brexit: trade in goods (24th Report, Session 2019–21, HL Paper 249), para 62

74 Written evidence from the Institute of Directors (TIG0007)

75 Written evidence from Competere (TIG0004)

77 For further detail on this matter, see European Union Committee, Beyond Brexit: trade in goods (24th Report, Session 2019–21, HL Paper 249), pp 71–75.

79 7 (Sam Lowe)

80 European Union Committee, Beyond Brexit: trade in goods (24th Report, Session 2019–21, HL Paper 249), para 111; European Union Committee, Beyond Brexit: food, environment, energy and health (22nd Report, Session 2019–21, para 24.

81 Q 1 (Elly Darkin)

82 HM Government, The Border with the European union: Importing and Exporting Goods (November 2021) pp 70–89: [accessed 30 November 2021]

83 Q 16 (Luke Hindlaugh)

84 Q 29 (Luke Hindlaugh)

85 Written evidence from the Horticultural Trades Association (TIG0009)

86 Written evidence from the National Farmers Union (TIG0015)

87 Ibid.

88 Q 16 (Luke Hindlaugh)

89 Written evidence from the National Farmers Union (TIG0015)

90 Q 92 (Michael Ellis MP)

91 Written evidence from the Horticultural Trades Association (TIG0009)

92 Q 4 (Sam Lowe); see also Q 32 (Luke Hindlaugh, William Bain).

93 This Committee’s Sub-Committee on the Protocol on Ireland/Northern Ireland has previously concluded that a “UK-EU SPS/veterinary agreement” would be “one of the most significant single measures to alleviate the regulatory and administrative burden of the Protocol” and is “manifestly in the interests of Northern Ireland”. The Sub-Committee expressed regret that the UK and EU have so far been “unable to reach a compromise” and called on the Parties to “intensify the search for an agreed SPS/veterinary solution”. See European Affairs Committee, Report from the Sub-Committee on the Protocol on Ireland/Northern Ireland: Introductory report (2nd Report, Session 2021–22, HL Paper 55), paras 230–235, 245–246.

94 The EU has previously suggested that a ‘Swiss-style’ veterinary agreement based on alignment could be agreed on a temporary basis, and “could be reviewed once the UK concludes new trade deals.” European Commission, ‘Examples of flexibilities identified by the European Commission in an effort to ensure the full implementation of the Protocol on Ireland/Northern Ireland’. (9 June 2021): [accessed 8 December 2021]

95 Q 32 (Luke Hindlaugh, William Bain)

96 32 (William Bain)

97 Q 25, Q 32 (Luke Hindlaugh); see also written evidence from the Food and Drink Federation (TIG0016).

98 Written evidence from the National Farmers Union (TIG0015)

99 Q 92 (Michael Ellis MP)

100 European Union Committee, Beyond Brexit: trade in goods (24th Report, Session 2019–21, HL Paper 249), para 124; see also written evidence from ADS (TIG0003).

101 Q 43 (Dr Anna Jerzewska)

102 There are exceptions where full customs declarations have been required for imports since 1 January 2021—notably for controlled goods, such as alcohol and tobacco. HMRC also reserves the right to tell traders to provide full customs declarations, for example if they have a poor compliance record. See HM Revenue and Customs, ‘Delaying Declaration for EU goods brough into Great Britain’, (28 June 2021): [accessed 30 November 2021]

103 Oral evidence taken on 26 October 2021 (Session 2021–22), Q 12 (Lord Frost CMG)

104 Q 10 (Joe Marshall)

105 Q 16 (Luke Hindlaugh, James Sibley)

106 Written evidence from the Federation of Small Businesses (TIG0017)

107 Q 58 (Sophie Dean)

108 Written evidence from ADS (TIG0003)

109 Q 10 (Elly Darkin)

110 45 (Sarah Laouadi)

112 Q 58 (Sarah Dean)

113 Norway is a member of the European Economic Area (EEA), and therefore has a different economic and political relationship with the EU to that of the UK. Like the UK, however, it is outside of the EU’s customs union.

114 Written evidence from the Food and Drink Federation (TIG0016)

115 Q 65 (Sophie Dean)

116 The TCA does, however, contain a separate Protocol on combatting VAT fraud.

117 European Union Committee, Beyond Brexit: trade in goods (24th Report, Session 2019–21, HL Paper 249), paras 160–176.

118 Written evidence from the Federation of Small Businesses (TIG0017)

119 Q 17 (William Bain, James Sibley); Q 49 (Dr Anna Jerzewska)

120 Commission Implementing Regulation (EU) 2021/265 of 9 June 2021 amending Implementing Regulation (EU) 2020/194 as regards the exchange of records held by taxable persons or their intermediaries and the designation of competent authorities responsible for coordinating administrative enquiries, OJ L 214/1, 17 June 2021

121 The European Commission justifies the listing of Norway on the grounds that the agreement between the EU and Norway on administrative cooperation, combating fraud and recovery of claims in the field of VAT, which entered into force on 1 September 2018, is “similar in scope” to the relevant EU legislation. See Commission Implementing Decision (EU) 2021/942 of 10 June 2021 laying down rules for the application of Council Directive 2006/112/EC as regards the establishment of the list of third countries with which the Union has concluded an agreement on mutual assistance similar in scope to Council Directive 2010/24/EU and Council Regulation (EU) No 904/2010, OJ L 205, 11 June 2021.

122 Q 32 (James Sibley)

123 Written evidence from the Federation of Small Businesses (TIG0017)

124 Q 18, Q 32 (William Bain)

125 Q 32 (James Sibley); see also Q 32 (William Bain).

126 57 (Sophie Dean)

127 Letter dated 25 November 2021 from Rt Hon Michael Ellis QC MP, Paymaster General, Cabinet Office to Lord Kinnoull, Chair, European Affairs Committee:

128 Lorries from Northern Ireland, however, may carry out two cabotage operations in Ireland. See Trade and Cooperation Agreement, Article 462

129 Before the end of the transition period, UK hauliers were subject to EU rules allowing unlimited cross-trade and up to three cabotage journeys in the territory of another Member State. See European Union Committee, Beyond Brexit: trade in goods (24th Report, Session 2019–21, HL Paper 249), para 197.

130 On 28 October 2021, in light of the shortage of HGV drivers, the Government temporarily and unilaterally extended road haulage cabotage to allow, until 30 April 2022, unlimited cabotage movements of HGVs within Great Britain for up to 14 days after arrival in the UK. See HM Revenue and Customs, Temporary extension to road haulage cabotage (27 October 2021): [accessed 30 November 2021]

131 Written evidence from Logistics UK (TIG0010)

132 Letter dated 19 October 2021 Lord Kinnoull, Chair, European Affairs Committee to Lord Frost CMG, Minister of State, Cabinet Office:; Letter dated 2 November from Lord Frost CMG, Minister of State, Cabinet Office to Lord Kinnoull:; Letter dated 18 November 2021 from Lord Kinnoull, Chair, European Affairs Committee to Lord Frost CMG, Minister of State, Cabinet Office:; Letter dated 26 November 2021 from Lord Frost CMG, Minister of State, Cabinet Office to Lord Kinnoull:

133 Written evidence from Logistics UK (TIG0010); see also Q 17 (Luke Hindlaugh).

134 Written evidence from Logistics UK (TIG0010)

135 Written evidence from the Federation of Small Businesses (TIG0017)

136 Written evidence from the National Farmers Union (TIG0015)

137 Written evidence from the Institute of Directors (TIG0007)

138 Written evidence from the Institute of Directors (TIG0007) and from the National Farmers Union (TIG0015)

139 Q 59 (Sophie Dean)

140 Written evidence from the Institute of Directors (TIG0007) and from the Federation of Small Businesses (TIG0017)

141 Q 65 (Emma Churchill)

142 HM Revenue and Customs, ‘Apply for a grant to help small and medium-sized businesses new to importing or exporting’, (15 April 2021): [accessed 30 November 2021]

144 Written evidence from the Federation of Small Businesses (TIG0017) and from the Institute of Directors (TIG0007)

145 Written evidence from the Institute of Directors (TIG0007)

146 Written evidence from the Federation of Small Businesses (TIG0017) and from the Institute of Directors (TIG0007)

147 Q 10 (Elly Darkin)

148 Written evidence from Logistics UK (TIG0010); see also written evidence from the Agricultural Industries Confederation (TIG0002); ADS (TIG0003) and the National Farmers Union (TIG0015).

149 Q 33 (Sarah Laouadi)

150 10 (Sam Lowe); see also Q 30 (Luke Hindlaugh).

151 Q 48 (Sarah Laouadi)

152 Q 30 (Luke Hindlaugh)

153 Q 30 (Luke Hindlaugh); see also written evidence from Logistics UK (TIG0010).

154 Q 10 (Sam Lowe)

155 Oral evidence taken on 26 October 2021 (Session 2021–22), Q 14 (Lord Frost CMG)

156 Q 57 (Emma Churchill)

157 Q 10 (Elly Darkin); see also written evidence from the Institute for Government (TIG0014).

158 See Article 2 of Council Decision 2021/689 on the conclusion, on behalf of the Union, of the Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, of the other part, and of the Agreement between the European Union and the United Kingdom of Great Britain and Northern Ireland concerning security procedures for exchanging and protecting classified information, OJ L 149/2, 29 April 2021

159 Oral evidence taken on 26 October 2021 (Session 2021–22), Q 14 (Lord Frost CMG)

160 Q 57 (Emma Churchill)

161 Q 10 (Elly Darkin)

162 Q 57 (Emma Churchill)

163 Q 10 (Joe Marshall)

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