Brexit, borders and bureaucracy: how British fashion brands are coping

Sas Alavi, Merc

“Getting into the ports has been challenging. We’ve had to air freight more than we’d like to into the UK, and although there have been no issues trading with the US or outside of the EU, definitely until they sort out what I hope are some of the teething issues […] it’s challenging and difficult.”

Samantha Cameron, founder of fashion brand Cefinn and wife of former Prime Minister David Cameron, who gave the UK a referendum on its EU membership, told BBC’s Women’s Hour today that not even she was able to cut through the new red tape surrounding fashion exports to the EU following Brexit.

When UK business was told that Prime Minister Boris Johnson had secured a deal with the EU just before Christmas, retail was mightily relieved. Until it saw the detail. Changes to VAT status and the rule of origin (only goods made within the EU and UK, which much of fashion is not and certainly not entirely, can move tariff free) have provided a headache and in some cases have brought exports and e-commerce, if not to a standstill then a slow trickle.

Is Samantha Cameron right, and are these teething issues? In some cases, no. The rules are here to stay and British fashion brands are going to have to find a way to work with them as cross-border trade, be it wholesale or e-commerce, is crucial in a pandemic-battered world. For the finer detail on what the new rules are and how to deal with them see the first part of our series “Brexit, borders and bureaucracy: logistics experts offer advice for fashion exporters”.

In this feature, we talk to brand owners and distributors to find out how they have been coping since the new deal came into force on 1 January 2021.

Sas Alavi, Director, Merc (pictured above)

“Merc has had up to seven weeks of delays on container imports and for hard won e-commerce orders small packet carriers (ITD) have actually lost export batches of our orders due to their own lack of preparedness.

“As the agreement is now hard fastened in, and as we move away from the short term, EU wholesale will be less possible from the UK, and EU e-commerce from the UK will be less possible. The business model just does not allow it. This is because of the double duty on third party country produced goods. Then there are the associated costs of moving goods between the UK and EU – maybe some companies will absorb these costs, but for how long?

“Customers on both sides of the EU and UK are realising that buying and selling is not what it used to be. There are delays, administration costs and taxes. With things being more expensive, consumers will turn inwards into their own respective blocks.

“What is important to remember is that COVID-19 and Brexit are massive disruptors and, sadly, established businesses and large department stores have literally collapsed under the change that is sweeping across the UK. No-one is immune. Therefore, it is a period to adapt, re-energise and come out of our comfort zones and it is a time to re-train and re-learn. And, if you can, it is a time to reach out to your team mates and offer help. After all, if not now, when?”

Aron Sharpe, Managing Director, Options Fashion Distribution

(European distributors for Tanner Goods, Quoddy, Ebbets Field Flannels, Reyn Spooner, Colchester Rubber Company, Uniform Bridge, Roster Sox, POTEN and Frizmworks, and global license holders for Peck and Snyder, US Rubber and Dubbleware)

Aron Sharpe, Options

“The real issue is double duty. Having to pay duty in to the UK and then again into Europe is a scandal. Both sides have repeatedly talked of a level playing field and no trading advantage. Instead, they have ignored all import /export businesses and someone in the short term has to consume the extra duty.There is no free trade as suggested by our government and the EU it is a complete lie.

“There are no issues receiving goods, the UK is not the issue, the real issue lies at the European countries customs where charges are seemingly loaded up.

“In terms of the real challenges that now need to be met, in the first instance it’s rectifying the issue for the immediate deliveries, and then will simply be calculated into prices resulting in at least a 12% uplift at retail price. Long term I would hope that both sides would look at the issue and resolve it, as everyone loses except customs.

“How can any problems be overcome? At further expense to either the exporter /importer or by using bonded warehouses which are of course a further expense.

“Also, e-commerce customers are getting hit with duty and import charges due to duty being charged even though duty has been paid in UK. There is no free trade so excise is due to be paid by the end user and this kills ecommerce companies in the UK. So, the only way to operate is to deliver duty paid which has costs to be consumed by either the e-commerce company or the customer.

“In terms of how it is affecting the wholesale business, in the short term it is of course a problem for suppliers having to change their model and logistics operations overnight – with no warning or time to adapt. It’s too early to tell how it is effecting wholesale sales to overseas customers, as the sales season is in progress, but it’s simply just another problem in these uncertain times to overcome.”

Simon Carter, founder and CEO, Simon Carter

Simon Carter
Simon Carter

“Brexit is proving to be every bit the nightmare we thought it would be. Various new documents are now needed. The main one is the Country of Origin, or COO. The ‘deal’ isn’t really tariff free. For it to be ‘free’ the goods you import or export need to be predominantly made in UK or EU. Currently, EU are accepting self-certified COO’s but that’s because we are in the ‘grace period’ until the end of March. Thereafter it’s likely they will insist on proof of origin. So, more paperwork. We are being charged more by our shippers too.

“Another problem is our web customers are being hit with clearance fees of around 15 euros and local VAT of up to 23%, none of which they had before. That’s for our shirts, which are tariff free as they are made in Portugal. Cufflinks, which are made in China, attract additional tariffs of around 5%. Also, it’s not just the UK that’s totally confused. We have had incidences of European countries charging tariffs where they’re not due as they don’t understand the rules. Like a number of small businesses, we are considering suspending all web sales to Europe. The real challenges that now need to be met are clarity and certainty, both for imports ad exports.

“I don’t think they are teething problems, I think this is the new reality. It will get worse when the ‘grace period’ expires. The EU have reserved the right to impose more tariffs on the UK to discourage wide divergence from EU regulations. We’ve seen them fire the first warning shot on this as Boris’s idiots start to prepare the groundwork for watering down workers’ rights.

“It’s hard to say how any problems can be overcome. I imagine that the brokerage firms will start to streamline the process for customers like us, but this will come with a cost and we will continue to have to fill out more documentation prior to shipment.

“There are also complex labelling issues to be overcome. We can no longer wholesale in euros, otherwise we’d need to label in the language of the destination country. Even exporting in sterling presents potential issues ie. we need to have contact details of an office for every country we export to, on the garment, and we’re still unclear how to achieve that. The government is now suggesting that UK exporters scale back in the UK and open European offices, shedding UK jobs in the process. You couldn’t make it up. But, you could foresee it. Clearly.”

Phil James, founder and Creative Director, &Sons

Phil James &SONS
Phil James &SONS

“Having consulted our Head of Operations, Kelly James, we have encountered delays both importing and exporting, and customers are receiving duty notices to pay. Also, suppliers are needing to supply different paperwork for importing. So, in general there are additional costs and delays having left the EU.

“Keeping our customers happy, we hope to start paying duty on our customers behalf but this will affect our business massively. I hope they are just teething problems but, in reality, there will no doubt be additional costs and paperwork that takes time long term.

“We are working with our shipping partners for solutions, and we are keeping our customer informed. We are also looking for other ways to carry out business with the EU.

“I fear we will lose customers if we do not pay their new duty penalties so it’s a lose lose situation. We either lose potential long-term customers and/or lose money.”

Simon Tennant, Sales Director, Sanders

Simon Tennant, Sanders

“I won’t say it’s easy, but we’re working through it and we’re positive about it. There’s always a challenge when you’re exporting. When I woke up on Christmas Eve and it was revealed there was a 0% duty deal, I was immensely happy. Since then, it’s got a little bit more complicated with shipping costs, carriage and taxes, especially considering the costs that the carriers are adding on.

“However, we’re working closely with DHL and we’re also working with UPS. DHL in particular are doing their utmost to resolve all the issues. Issues include the volume of work going through their systems and warehouses, and the extra paperwork that we’ve had to create. But what they’ve actually done is create an online booking system that is paperless. For me, DHL are leading the way and they’ve really helped us.

“I also talk to a lot of our compatriots in the trade who are menswear orientated and I talk to retailers. I’m getting a general read of what everyone else is doing and then we’re all comparing notes. The word out there is some things are going through and are being delivered very quickly, and some things are taking two to three weeks.

“We didn’t send anything for the first week, we let the dust settle after Brexit. We then spoke to our customers and told them we’d be sending their orders, and we’d be sending it excluding VAT – they would have to pay the tax when it lands. We told them there might be a charge, but we don’t know what that charge might be. We said they’d have to pay the tax, and then claim the tax back. That’s for retailers. Some retailers get it back, some don’t, depending on which country. There’s no VAT on exports anymore. Before Brexit, the VAT rate was standard across all European markets, but it’s now not. You’re actually paying the VAT at your country’s rate when it lands.

“I learnt something new only yesterday on a Zoom meeting with our DHL manager, which was, as of Friday, they are now requesting EORI numbers from our customers in their markets. It’s a European registration number which allows you to trade within and out of the EU. We knew we needed one to export in to the EU before Christmas, and we organised it. For the UK, it’s basically your VAT number, with three noughts on the end. You needed that to trade.

“If anyone is sending something from France, or any other EU country in to the UK, they now have to specify their country’s EORI number and also the UK number of their customer. As of last Monday, exporting in to Europe, we needed to do that with our customers. We’re learning on the hoof.

“The EORI number is not to help the tax in the country you’re sending to, it’s just to oil the wheels of the process of getting it through customs. If the numbers match, it goes in to one channel – and it goes through a lot quicker. If there’s a non-match, or there isn’t an EORI number, it goes down another channel and it stops! That’s been a lot of the problem over the last 10 days.”