Research to explore the Future Operating Model for UK borders: Report

Question 1

1.  Executive Summary

Accepted Answer

Following the UK’s exit from the EU, customs controls for trade with EU countries were introduced starting on the 1 January 2021. This necessitated a new set of requirements and different operational approaches which, when combined with the multiple stakeholders involved in border operations, leads to a complex and changing landscape. It is therefore crucial that organisations affected by post-transition process changes understand and prepare for them.

HMRC commissioned Verian (formerly Kantar Public) to explore businesses’ and intermediaries’ experiences and expectations from new customs controls. This was to inform the transition to full customs controls, the Future Operating Model for UK borders, and the 2025 Borders Strategy more widely.

1.1 Research aims and approach

The research was comprised of 2 iterative stages of work, with separate objectives.

Stage 1 sought to understand businesses’ and intermediaries’ awareness and understanding of new customs obligations, their experiences of trade, and any support and information needs as they adapted to the new requirements. Interviews with 40 businesses and 15 intermediaries were conducted in March to April 2021 to explore these themes.

Stage 2 aimed to identify how traders’ businesses experiences evolved over the course of 2021 and investigated their needs for the future. The first strand involved 12 further interviews with businesses who participated in Stage 1 and focussed on updating understanding of experiences of trade. The second strand involved 6 focus groups with 25 businesses who had not previously taken part in the research and explored their needs and preferences across 3 themes: the role of HMRC with regards to trade, decisions on intermediaries, and use of authorisations. Fieldwork was conducted in October to November 2021.

During stage 2, businesses were encouraged to share their expectations of how HMRC should operate in a future border model. Some of these expectations may be things which HMRC is not currently able to provide due to policy and legislative considerations. For example, very tailored, business specific advice on customs and border requirements.

Nevertheless, given the exploratory nature of the research businesses were prompted to be as open as possible with their views to help inform the development of HMRC’s future role.

1.2 Businesses’ and intermediaries’ experiences of trade in early 2021

While there was widespread high-level awareness about the UK leaving the customs union, businesses approached new customs controls with widely varying levels of understanding and preparation. Intermediaries were generally more knowledgeable about the changed requirements because of their organisational expertise in trading.

Overall businesses found trade under new customs controls more difficult, costly and time consuming in early 2021. Some had better experiences than expected, but still noted a degree of negative impact on their business. Many relied heavily on intermediaries to navigate customs requirements and generally found their advice and support helpful.

Experiences of trade under the new arrangements appeared to be determined by 3 main factors: businesses’ preparations, the effectiveness of relationships with intermediaries, and pain points in the external environment.

Regarding businesses’ preparations, these were highly iterative, and mostly driven by businesses’ internal deadlines or the need to troubleshoot. Even when businesses did what they could to prepare, they felt preparation was complex because of difficulties understanding technical guidance, issues identifying relevant information, and on-going changes to guidelines.

The effectiveness of relationships with intermediaries was positively influenced by their intermediary’s own preparation as well as their ability to provide tailored support.

In terms of experiences of particular pain points in the external environment, this included difficulties such as:

satisfying paperwork requirements (for example identifying correct commodity codes or rules of origin requirements)
the inability to accommodate last minute changes to declarations
delays at port
inconsistencies in the application of rules by different EU countries

Businesses were mostly still finding out about elements of the new customs processes and wanted clear, step-by-step guidance through the trade journey, ideally tailored to their sector and business size. Intermediaries expressed the need for a specialist, expert helpline to help them resolve more complex issues and to answer technical queries. Participants generally expected this information to come from HMRC.

1.3 How businesses’ experiences evolved

Businesses’ experiences generally improved over the course of 2021, as they got a chance to familiarise themselves with processes and consolidate effective ways of working with intermediaries. This was particularly true for those dealing with routine and simple trade operations, while those handling complex goods or requirements were still likely to face challenges.

Significant ongoing challenges included:

completing paperwork (particularly sourcing commodity codes, origin and other required information for controlled goods and items made of multiple parts)
seemingly varying requirements being enforced by different EU countries
ongoing delays (especially if unable to track shipments)
confusion about duty amounts and liabilities

By November 2021, businesses confirmed some impacts experienced earlier in the year (for example increased costs associated with trade, concerns about their reputation and competitiveness, and changes to their supply chains). Overall, there was a sense that trade was picking up after the slower pace and hesitation of the first few months of 2021. However, businesses struggled to unpick whether on-going challenges were due to custom controls or other factors such as the COVID-19 pandemic.

As businesses still felt uncertain about future requirements, they were still looking for clarity and tailored support (for example digestible instructions based on businesses’ set ups, help troubleshooting).

1.4 Exploring businesses’ needs and preferences for the future

Three main areas were discussed with participants when exploring their needs and preferences for the future: the role of HMRC, the decision about whether to use an intermediary, and use of authorisations.

Role of HMRC: businesses perceived HMRC’s role to be focused on setting the rules for trade and providing the tools for businesses to be able to follow them. Most felt HMRC could do more to provide targeted and digestible information, as well as potentially one-to-one support.

Decisions on intermediaries: the decision to use an intermediary appeared to be driven by businesses’ limited knowledge or resource to manage customs processes independently. Businesses’ appeared to have established strategies to identify intermediaries, with their considerations relying mainly on costs, reputation, and personal experience. While some businesses were taking actions to upskill, there was still uncertainty and some concerns that they would only feel confident to manage independently until new customs changes came into place.

Authorisations use: businesses were generally unaware of authorisations, and those who used them tended to refer to them using different terms. Barriers to their use included lack of understanding, perceived relevance, or resources for what was considered a lengthy and complicated process. Clearer instructions and streamlining procedures and approval times could support uptake of authorisations.

Question 2

2.  Introduction

Accepted Answer

2.1 Background to the research

Following the UK’s exit from the EU, a transition period began which ended with the introduction of new customs controls for trade with EU countries on the 1 January 2021.

As the UK’s tax and customs authority, HMRC works to help businesses maintain trading operations and fulfil their obligations following the transition period through a staged process. This new process gradually introduced new customs obligations, referred to as Staged Customs Controls^{[footnote 1]}. Changes to customs requirements and systems are outlined in the updated Borders Operating Model published by the UK government on 13 July 2020.

There are multiple stakeholders involved in border operations who interact with each other, including:

businesses, who import and export goods and services
intermediaries, who support administrative processes and manage the flow of trade
ports and airports, who facilitate the entry or exit of goods from the UK

There are also different operational approaches to international trade. For example, businesses can choose the type of intermediary service they use, and there are additional rules businesses are required to follow for specific trading activities.

Due to this complex landscape, it is crucial that organisations affected by post-transition process changes understand and prepare for them. For this reason, and because experiences of smaller businesses are less well understood, HMRC commissioned Verian (formerly Kantar Public) to explore businesses’ and intermediaries’ experiences and needs from new customs controls to inform the transition to full customs controls, the Future Operating Model for UK borders, and the 2025 Borders Strategy.

2.2 Research aims

The main aims of the research were to explore businesses’ and intermediaries’ views and experiences of customs processes, as well as identifying their needs and preferences for the Future Operating Model and its support offer. The research was comprised of 2 iterative stages of work, with separate objectives. Stage 1 focused on experiences of the transition to new customs controls for trading with the EU, whilst Stage 2 had a greater focus on needs and preferences for the future.

The objectives of Stage 1 were to:

understand businesses’ and intermediaries’ awareness and experiences of new customs obligations and processes in early 2021
investigate the barriers and enablers of positive customs experiences through the staged controls and transition to full customs controls for those already using them
identify the ongoing impacts of COVID-19 on businesses and intermediaries preparing for and adapting to delaying declarations and full customs controls
map information and support needs for the move to full customs controls

Stage 2 was comprised of 2 strands with separate objectives. The first strand focussed on updating understanding of businesses’ evolving experiences, and investigated:

businesses’ experiences of the new customs obligations and processes since Stage 1 interviews (March to April 2021), and perceived impacts on Great Britain to EU trade patterns
the role of intermediaries in trade and any changes over the course of 2021
how prepared businesses were to approach full customs requirements, and identified preferences for additional support or guidance going into full customs controls

The second strand, focussed on businesses’ needs and preferences for the future and it aimed to:

further unpick businesses experience of changes, pain points and expectations for the future
investigate businesses’ understanding of HMRC’s role in border processes
understand decision making around the use of intermediaries and how this could be facilitated
understand drivers and barriers to the use of authorisations and possible improvements

In this strand of the research, businesses were encouraged to share their expectations as to how HMRC should operate in a future border model. Some of these expectations may be things which HMRC is not currently able to provide due to policy and or legislative considerations including, for example, very tailored, business specific advice on customs and border requirements. Nevertheless, given the exploratory nature of the research businesses were prompted to be as open as possible with their views to help inform the development of HMRC’s future role.

2.3 Method

Different stages of the research used different qualitative approaches.

Stage 1 consisted of sixty-minute telephone or online interviews with 40 businesses and 15 intermediaries, carried out between March and early April 2021. The interviews were carried out with a mix of businesses and intermediaries of different sizes, types, and sectors. The sample included businesses with different trading patterns and frequencies with EU or the Rest of World (RoW), and different levels of intermediary use. There was also mix of initial knowledge surrounding customs controls.

Stage 2 combined different methodologies to update the understanding of businesses’ experiences and draw insight for future strategy work. Fieldwork for both elements of the stage was carried out between October and November 2021.

The first strand, focussed on understanding the evolution of businesses’ experiences and support needs, involved 12 sixty-minute telephone or online interviews with businesses reconvened from the Stage 1 sample. The second strand, focussed on exploring businesses views and preferences for the future around 3 themes: the role of HMRC, decisions on intermediaries, and authorisations use. It consisted of 6 ninety-minute online focus group discussions with 25 businesses in total, who had not previously taken part in the research.

Businesses were split in groups based on 3 criteria:

authorisation use (one group included users and the other non-users)
intermediary use (one group included businesses managing independently and the others using intermediaries most of the time)
frequency of trade (one group included low frequency traders, and the other medium to high frequency ones)

The sample also included a range of businesses sizes, trading patterns and types of goods traded.

This report draws together findings from all elements of the project. The topic guides and discussion guides used for this project can be found in the technical appendix.

Question 3

3.  Awareness of, and approaches to, new customs processes among businesses

Accepted Answer

This chapter covers businesses’ and intermediaries’ awareness of new customs processes as of early April 2021, their attitudes to the changes, and the approaches they took to cross-border trade at this time.

3.1 Businesses’ awareness and approaches

Despite a widespread and general awareness about the UK leaving the customs union following the EU Exit, businesses had varying levels of knowledge of new customs processes and positioned themselves on a spectrum from not aware at all to moderately knowledgeable about what changes would entail. While businesses tended to be aware that elements of the trade process would change, there were varying levels of understanding of specific requirements.

Businesses appeared to approach the changes and customs procedures in different ways. These mindsets, explored below, shaped how they thought about, prepared for and approached new customs procedures.

Mindset 1: Unengaged

These were typically sole traders or smaller businesses with less than 10 employees. They had minimal or no certainty over the trading approach they were taking, for instance, whether they were delaying declarations or trading under a full customs controls regime. They lacked recognition about requirements or practices that needed to change.

A sole trader said: “We knew about it but didn’t take it seriously because Brexit took so long and was thinking yeah, it will be alright.”

Mindset 2: Anxious

Anxious businesses also tended to be smaller businesses, who historically traded solely or mostly with the EU. They had an awareness that they would have to make changes to their import and export practices, but were unsure about what to do or how to manage changes. Because of this, worry could prompt their trade decisions and they experienced high levels of anxiety.

A business with 1 to 9 employees said: “We haven’t done any imports because I’ve been too frightened….because we don’t understand what we’re doing at the moment.”

Mindset 3: Delegators

Businesses with a Delegator mindset could have different sizes and set ups; they were generally conscious of changes to customs controls for trade with the EU and the need to adapt. However, they wanted someone else to manage these for them, and they were the most likely to rely on an intermediary or other partners, such as suppliers, for most, if not all, their trading operations.

A business with 10 to 49 employees said: “We probably threw that issue [of preparation] at our current courier service…probably passing it on a bit really.”

Mindset 4: Methodical

Methodical businesses were typically medium to larger businesses (up to 249 employees) with more experience trading with the Rest of World (RoW) and with medium to high trade frequency, which appeared to give them more experience with customs processes and requirements. They felt in control of new processes, with lower levels of anxiety compared to others. However, they could still feel uncertain about specific requirements or regulations that had changed multiple times.

A business with 50 to 249 employees said: “We have a full understanding of how deferring the accounts works, because of our experience with the rest of the world. We just had to apply for some reference numbers and wait for the confirmation.”

3.2 Sources of awareness and understanding

Businesses had a greater level of understanding where they had used multiple, formal, sources of information. While none of the businesses in the sample had engaged with the Border Operating Model, there appeared to be differences in information consumption based on mindset.

Unengaged businesses tended to absorb information passively through the news or adverts on websites they visited. There was some indication they gathered high level information, but without seeking detail.

A business with 1 to 9 employees said: “I did see one TV advert over Christmas which mentioned getting ready for it and stuff…I haven’t seen much for such a major thing.”

Anxious businesses relied on informal guidance from business forums or word of mouth, which meant they sometimes could receive mixed messages fuelling confusion. They struggled with formal guidance from the government as they saw it as too technical, and in some cases relied on third parties, such as intermediaries, to get reassurance.

A business with 1 to 9 employees said: “[Other businesses] were not sure, we were trying to figure it all out ourselves and that made me feel really nervous.”

Delegators were happy for third parties, such as suppliers, trading partners, or intermediaries, to feed them information on a ‘need to know’ basis. There were instances when businesses looked for ‘high level’ information on the HMRC website, but partners were seen as the primary source of guidance.

A sole trader said: “We had various emails off our plant supplier. They basically took control of the whole situation… We just went for the easy option and let them handle it.”

Methodical businesses tended to have dedicated resource within the business dealing with customs processes and to rely on official guidance, with mixed results. They also referred to sector-specific and professional associations (for example Chambers of Commerce) and intermediaries.

A business with 50 to 249 employees said: “We went through the technology, what things meant, what codes we needed to use.”

3.3 Intermediaries’ awareness and understanding

Intermediaries were able to use their industry knowledge to build a good understanding of what changing customs controls would mean for them and their clients. Their expertise and existing networks allowed them to make earlier and more accurate assumptions about what changing customs controls might involve, which later improved their experiences.

Those who facilitated trade with EU countries before the single market was established benefited from this historical knowledge, and were able to start preparing earlier than others, making earlier assumptions about what the regulatory framework may look like. Similarly, those with experience facilitating trade with the Rest of World (RoW) could tap into known practices to anticipate similarities.

Intermediaries also had fewer hurdles to overcome understanding information compared to businesses, as they were familiar with the technical language and acronyms used in official guidance. Dedicated training sessions, trade association guidance (for example British International Freight Association (BIFA)) and conversations with networks provided further valuable help. While not all intermediaries mentioned the Border Operating Model documents as a source of information, those who did had mixed views. Some felt it was too generic and outdated by January 2021, others found it clear and informative.

3.4 Intermediaries’ approach to customs changes

Intermediaries were generally confident in their preparation and understanding of custom processes and used their experiences facilitating trade with countries already requiring customs controls to shape their approach.

Contributing to positive attitudes was a recognition of the potential for additional business to be generated, either through new clients or increased fees from providing additional services to new and existing clients. Some explained they had set up a new business in the run up to the EU Exit for this reason.

However, intermediaries reported difficulties getting specific advice and technical information required to solve complex issues from HMRC helplines. Hauliers in particular found information released leading up to January 2021 loose and changeable, making delivery more complex. This was further exacerbated by the fact that finding specific information could be easier in certain EU countries than others and that some could be stricter than expected in their application of clearance requirements (for example transit forms).

Question 4

4.  Businesses’ and intermediaries’ experiences of trade in early 2021

Accepted Answer

This chapter explores businesses’ and intermediaries’ experiences of trade with the EU between January and April 2021, including decision making, benefits, and challenges around working together.

4.1 Businesses’ perspectives

Overall, businesses described confusion and increased difficulties in trading activities between January and April 2021, with some explaining that they had reduced frequency of trade because of them.

Challenges experienced by businesses were determined by several factors. The increased complexity of processes meant that they needed additional time and staff resource to gather information and complete paperwork (such as sourcing commodity codes and country of origin information).

This contributed to a generalised sense of worry about making mistakes and consequent issues, like goods being sent back once at port, delays, or fines. Concern was particularly marked among Anxious businesses, who did not feel they had a sufficient level of understanding to be sure they were doing things correctly.

A business with 50 to 249 employees said: “Before we just said we want 20 bags of cement, now we need all the product codes. So much more paperwork before it leaves our building.”

Businesses also noted delays to their pipelines and normal delivery times and reported losing flexibility to deal with quick turnaround or personalised requests, with financial and reputational consequences. Increased costs associated with trade, including higher shipping fees, VAT and duties (unexpected for some unengaged businesses) created concerns about their competitiveness and ability to maintain successful trade relationships with EU countries.

A business with 10 to 49 employees said: “If a customer in Spain wanted to buy a certain painting he favoured to buy from us because of lower rates, but now they are looking to buy the painting in France or Germany and we’re losing customers.”

However, some businesses had been pleasantly surprised that they had not encountered significant challenges in early 2021 and found their experience of exchanging goods with the EU easier than they had initially anticipated. This included smooth administrative processes, for example ease in getting an Economic Operators Registration and Identification number (EORI number), and limited to no delivery delays.

A business with 1 to 9 employees said: “[Trade has been] very straightforward so far, they just want to know what is in the box and that is all they want to know at the minute.”

Businesses reporting early positive experiences tended to be: those who had prepared and had efficient intermediaries to rely on to provide instructions and promptly resolve any issues; those trading a low volume of goods or trading infrequently, which meant they could better manage delays if they occurred; and those who attributed issues to COVID-19 or were more accepting of initial, minor complications regarding them as teething problems. However, it should be noted that a smooth experience did not necessarily mean a lack of impact on businesses, who still noted increased costs associated with trading with EU countries.

4.2 Intermediaries’ perspectives

Intermediaries had mixed feelings and experiences of the new customs processes and could face similar issues to businesses.

On one hand, changes to trade regulations created an opportunity for intermediaries to expand their sphere of influence and win significant new business. Most felt that they had been able to successfully adapt to changes and felt confident about their systems and had been pleased about their clients being responsive and willing to listen to their advice. Customs agents were particularly positive about their experience at the time, although it appeared that they tended to only accept work they felt confident about. Others generally expected businesses to settle into new processes as they got used to requirements.

A customs agent said: “We just follow the rules and magically your goods go across the border.”

However, intermediaries also highlighted difficulties and issues experienced in the first months of 2021. Some reported issues with clients including:

a persistent and low understanding of requirements, which could be time consuming to resolve
businesses taking their free advice without then giving them their business
a negative impact deriving from the decline in clients’ trading volumes with EU countries

There were challenges connected to increased administrative processes, additional costs (for example securing port badges, acquiring Customs Handling of Import and Export Freight (CHIEF) software), and specific systems or requirements such as duty deferment, T1 forms and transit, changing ports and ‘roll on roll off’ declarations, and moving mixed loads. These are explored in more detail in sections 5.2 and 5.3. Freight forwarders in particular also complained they could struggle to find hauliers to outsource work to, noted increases in hauliers’ fees, and many said they had to hire new staff because of the increased workload.

Some intermediaries also felt that HMRC advisers they had engaged with to resolve specific issues had limited knowledge about the latest requirements and that border staff had taken a discretionary approach to clearances.

4.3 Collaboration between business and intermediaries in early 2021

Since January 2021, businesses appeared to be increasingly relying on intermediaries to facilitate a smooth trading experience. Those already using intermediaries tended to carry on using the same partners for ease, or because of a trusted and positive relationship. However, it seemed that intermediaries’ influence had widened, as they now offered a wider range of services than before.

Those who started using intermediaries for the first time after January 2021 found that outsourcing declarations provided them with peace of mind, as they were confident they would be completed correctly (particularly Delegators). This, combined with a higher frequency of trade, justified cost.

However, some businesses, and particularly Methodical ones, could use a mixed approach and only got support with complex or particularly high value shipments. Some had concerns about the impact of intermediaries’ fees on their accounts. When this was the case businesses generally considered easing their reliance later in the year once they felt more confident managing independently, but there were no defined plans at the time of fieldwork.

Those not using intermediaries tended to be smaller businesses or sole traders with an Unengaged mindset who did so as a cost-saving measure. Where businesses traded with Rest of World (RoW) countries independently, they thought they had enough experience to do the same with EU ones. They felt that they would have had to supply information to intermediaries anyway, and that they may as well manage it themselves. However, these businesses mentioned receiving some support (for example recommended paperwork, information needed) from shipment companies (for example express operators) and Royal Mail.

On their part, intermediaries reported being open to supporting businesses, but when taking on new business aimed to minimise risks for themselves.

A customs agent said: “If there’s any level of risk associated we try not to touch it.”

Intermediaries tended to avoid work arrangements seen as unprofitable. This included large mixed loads, which were not considered cost effective, and interactions that would not lead to them providing services beyond advice (for instance, when businesses contacted them over email with multiple other intermediaries blind copied in, as these were seen as shopping around and unreliable).

A customs agent said: “I’m not going to do one declaration from them and never hear from them again”

Problematic clearances and processes, including moving controlled, hazardous, or perishable goods, and taking on transit procedures, also tended to be avoided, particularly by customs agents. These operations were seen as likely cause delays because of known issues associated with them or their complexity.

Finally, intermediaries did not pursue business when they could question clients’ trustworthiness or the benefits of the relationship. Some preferred focussing on current clients they knew they could trust, others conducted credit checks on new potential clients or were otherwise selective if they thought their service was not advisable.

Working relationships between businesses and intermediaries were generally described as positive and mutually beneficial. Intermediaries provided condensed information and tailored guidance for businesses, such as summary documents and clear guidance on record keeping. Importantly, intermediaries provided reassurance about paperwork being correct and support in resolving issues and managing transit, allowing businesses (particularly Delegators) to focus on other responsibilities. Some also saw them as less costly than redeploying or hiring dedicated staff to manage clearances.

A business with 10 to 49 employees said: “[The customs agent] has been really helpful, without him not sure how I would have worked it all out, I am too busy running the company.”

However, particularly at the start of January 2021, there was some sense among businesses that intermediaries (particularly hauliers) were still unclear about processes. While businesses still relied on them as a better option than self-serving, they noted limited preparation had negatively affected their experiences. Their increased fees could affect business profits, and while some planned to pass charges on to their customers, others saw reliance on intermediaries as short term because of this.

Finally establishing relationships with new intermediaries and building trust could take time, which could cause concern for businesses.

A business with 10 to 49 employees said: “The carriers especially in January didn’t seem to know what was needed, what was required of them until they were doing it.”

Businesses and intermediaries appeared to be aligned in their understanding of reciprocal responsibilities. Businesses were in charge of providing the required information, which was then taken forward by intermediaries, responsible for completing declarations and facilitating shipment. Intermediaries generally operated under direct representation, making sure that this was established in onboarding documents.

Question 5

5.  Factors determining businesses’ experiences of trade

Accepted Answer

This chapter explores how businesses’ trading experiences appeared to be shaped by a range of factors, some of which were independent from businesses’ control. These were:

business preparation for and level of understanding of new customs processes
effectiveness of businesses’ relationship with intermediaries and intermediaries’ own ability to navigate processes
the external environment, including processes and systems outside of businesses’ control

The 3 factors were interrelated, and challenges in just one area were sufficient to determine a negative experience overall. Each factor will be explored in turn in the following sections.

5.1 Business preparation

Preparation was a highly iterative process for businesses, who tended to be driven by their own internal deadlines, as opposed to government ones. While knowledge and recognition of official deadlines was established among intermediaries, these were considered less salient by businesses.

Businesses generally started, or planned to start, taking actions to prepare for trade a few weeks before they were due to ship or receive goods, which could coincide with HMRC timings for implementing changes. While some conducted initial research ahead of time (particularly Anxious and some Methodical businesses) this tended to be less fruitful as businesses felt circumstances were constantly evolving.

Some Unengaged businesses who had traded since January 2021 had not adapted to new processes. They had not encountered any issues yet and felt that preparation would not be required until issues emerged.

5.1.1 Active preparations and passive responses

Preparations took a variety of forms but tended to be a passive response to external prompts, rather than a series of proactive steps taken to increase readiness. While active preparation was happening, particularly for Methodical businesses, this was not always effective or sufficient for a good experience because of external factors encountered later in the trading journey. Some businesses, and Unengaged ones in particular, did not appear to be keeping adequate records or being aware of requirements.

Common active preparations included:

record keeping (although this was not always complete) was undertaken by all mindsets to different extents
accessing the required numbers and codes, such as EORI number, Incoterms, and commodity codes (taken by all mindsets to different extents)
gathering information, including discussing requirements with intermediaries or suppliers (taken by Anxious, Delegators, and Methodical)
setting up for duty deferment, as relevant and generally relying on intermediaries (taken by Anxious, Delegators, and Methodical)
training or upskilling, for instance by attending webinars (taken by Anxious and Methodical)
allocation of internal resource to manage declarations or information needed (taken by Anxious and Methodical)
protective measures such as stockpiling, which was usually expected to run out in the first quarter of 2021 (taken by Delegators and Methodical)
discussing new controls and potential issues, such as delays with supply chain (taken by Methodical only)
considering whether to trade under full customs controls or delay declaration (taken by Methodical only)
investing in new software or add-ons to existing IT systems. Few had heard of CHIEF badges and tended to rely on intermediaries’ systems (taken by Methodical only)

Common passive responses included:

responding to instructions from intermediaries or EU suppliers (taken by Unengaged, Anxious, and Delegators)
troubleshooting (taken by Unengaged, Anxious, and Methodical)
waiting for developments or postponing preparation (taken by Unengaged)

As part of preparatory arrangements, deciding which approach to take between delaying declaration and full customs controls was generally not proactive. Some larger businesses made an active decision to delay declarations to help cashflow. While these businesses felt they were keeping the required records there could still be confusion about specific paperwork needed. Where decisions were taken to trade under full customs controls, businesses were conscious of staying ‘on top’ of their workloads and finances.

Unengaged businesses tended not to be aware that there was a choice to make, often delaying declarations by default. In these cases, required documentation for supplementary declarations was not collected or saved, which could cause issues later down the line. Businesses in other mindsets left decisions up to intermediaries or took their advice.

Intermediaries also reported that some clients had not made a conscious decision to trade under full customs controls or delay declarations. Some had shared information on the options of delaying declaration or moving to full customs controls with their clients. Others had taken a more direct approach, generally recommending full customs controls to minimise mistakes in the long term. Delaying declarations was generally recommended in case of cashflow issues or high frequency of trade as in these cases, intermediaries thought businesses would benefit from putting off declarations. Those with clients delaying declarations tended to clear them regularly, as opposed to waiting until the deadline to submit them all, as they were concerned about multiple businesses submitting all records at once.

5.1.2 Facilitators and barriers to business preparation

There were a range of factors which acted as facilitators or barriers to business preparation. For example, internal resource, previous experience with declarations, and digestible guidance enabled more positive experiences for businesses.

Dedicated resource within the business, including committees, working groups, or staff with specific trade responsibilities was helpful to make critical decisions and stay on top of requirements. Businesses’ experience trading with the Rest of World (RoW) countries meant they had a more advanced ‘starting point’ for preparation as they were more familiar with important concepts (for example declarations, EORI numbers). However, this familiarity did not inevitably mean a smooth preparation experience, as businesses noted EU trade had separate specific requirements.

Guidance from intermediaries appeared to be an important input into businesses’ preparation. Advice from EU suppliers was also helpful, but some expressed concerns about relying on it as they feared that if complications (for example their limited understanding, delays) continued, then EU partners’ goodwill and support would end. Businesses particularly appreciated step-by-step information on processes, for example on applying for an EORI number, and sector-specific information from professional bodies that they could easily apply to their case.

However, irrespective of size or mindset, businesses found preparation complicated and many expressed the need for extra support.

A business with 1 to 9 employees said: “I found the terminology is quite technical, I’m not an accountant, I’m a business person.”

Information provided by HMRC was considered too changeable, generalised, and technical for businesses to effectively engage with, and some felt that messages they had been exposed to had not conveyed a clear call to action. Competing demands for resource meant that allocating time for preparation could be difficult, particularly as many businesses were firefighting issues related to COVID-19.

As a result, businesses across the sample commonly deferred responsibility to intermediaries and other partners to a greater or lesser extent, because they felt overwhelmed or because trade requirements were not perceived to be within their skill-set. Many required extra support and thought they would need more official, accurate, and digestible information. This is explored in more detail in section 6.

A business with 10 to 49 employees said: “We were so busy with COVID-19 that changes to things coming in and going out to Europe was pretty minor.”

5.1.3 Differences among mindsets in preparation approaches

Across the different mindset groups, a range of challenges arose in regards to businesses’ preparations, which are addressed in the following section.

For Unengaged businesses, preparation was inhibited by the lack of a specific ‘call to action’. These businesses had heard information on EU Exit in the run up to 2021 but tended not to take action until they needed to resolve issues.

Government adverts to ‘Get ready for EU Exit’ were dismissed as too general, and information on GOV.UK was considered more relevant to larger businesses. This led to reactive preparation prompted by receiving unexpected bills or delays, which could be highly stressful, instigate decisions to suspend trade to deal with issues, or mean businesses continuing to trade despite not adapting to processes under the assumption nothing had changed.

For Anxious businesses, awareness of gaps in their knowledge caused significant concern. Businesses with this mindset were mainly guided by upcoming trade deadlines, although some were aware of possible changes in the lead up to EU Exit.

Common issues making preparation difficult for them included difficulties gathering or understanding acronyms and other technical guidance, low resource to dedicate to preparation within the business, and ongoing anxiety despite intermediaries’ advice. These led to businesses feeling overwhelmed, sometimes to the point of suspending trade, or over-reliance on intermediaries.

A business with 1 to 9 employees said: “I felt very unprepared, I was just overwhelmed with actual work at the time. There were so many acronyms and forms that we needed - that was all so daunting!”

Delegators deferred responsibility and became reliant on others to overcome issues. They were generally prompted to make changes by other businesses in their supply chains, professional networks, or intermediaries.

They could find it complex because of issues finding capacity within their business to dedicate to preparation and low priority associated with this, as well as difficulties understanding specific information on requirements. Delegator businesses also felt that dealing with trade requirements was not their responsibility and focused instead on their core functions. These factors led businesses to wait for others to nudge them to take action, and reliance on intermediaries to act on their behalf consistently.

For Methodical businesses, the pressure of preparing could create frustration when information changed. These businesses were the most likely to be aware of trade policy deadlines and were driven by them as well internal ones. While they had dedicated internal resource to preparation, this cost money and time to the business, especially when rules changed, or they got conflicting advice or guidance.

Methodical businesses could also be affected by others in their supply chain not being ready or informed. As a consequence, businesses reported that preparation was seen as highly resource intensive, which created frustration.

5.2 Effectiveness of the relationship with intermediaries

For those who relied on them, intermediaries’ own preparation and smooth operations were critical to positive experiences. Established, professionalised, and tailored relationships with intermediaries appeared to facilitate better trading experiences.

When relationships were established, intermediaries better understood businesses needs and internal processes. This allowed them to effectively filter information and tailor requests to their specific circumstances. Some businesses relied on informal relationships such as friends that worked in the field to support them with trade. In these cases information was not tailored or regularly delivered. Support depended on goodwill and the arrangement was considered a short-term fix.

On the other hand, professionalised relationships had more accountability and businesses could benefit from reliable expertise. Finally, businesses valued intermediaries being able to tailor information to their needs. Some intermediaries even developed their own ways to present information, such as checklists and flowcharts that simplified otherwise complex materials and processes.

Despite having a more comprehensive understanding of changes and requirements, intermediaries also faced challenges both in their own internal preparation and in preparing businesses.

Setting up systems, such as duty deferment accounts and CHIEF could take longer than expected, with impact on the time available for training and familiarisation. Inconsistencies in information available from different sources on certain processes and regulators (for example, trade tariff instructions, codes accepted on CHIEF, documentation required in different EU countries, and duty liability) also undermined confidence in preparation. Some, particularly hauliers, found official HMRC guidance inconsistent and difficult to access.

Supporting businesses in their preparation could also be challenging, especially when businesses were not receptive to advice or guidance from intermediaries about the paperwork and needed to send certain goods such as food, or to complete invoices. In these cases, clients sent through records without necessary information or codes, which slowed down processes. Clients turning down further work after receiving advice or expecting advice free of charge, also put a strain on intermediaries’ resources.

Challenges faced by intermediaries had a significant knock-on impact on businesses. Although this was seen across different business types, effects were felt most significantly by those who were most reliant on intermediaries and had done little preparation themselves (in particular Delegators and Anxious businesses).

For instance, businesses mentioned that some large intermediaries had suspended operations at the start of January 2021 as they were not prepared. At the time of interviewing some businesses were still incurring delays because of this. The need to seek and disentangle additional advice, as well as the influence of market trends, also led intermediaries to reassess and raise prices. Businesses recognised that prices had increased, making the cost of trading increase further. For some businesses, this impacted the viability of relying on intermediaries to support their work.

5.3 External factors

Businesses and intermediaries were highly dependent on external process and systems running smoothly and consistently to give a positive trading experience. Both referenced particular pain points in the external environment causing difficulties in trade for them as they prepared for trade and continued on their trade journey.

5.3.1 External challenges while preparing for trade

External challenges experienced while preparing for trade included: changing information and guidance, identifying the correct commodity codes, following rules of origin, and sending documents in advance. These are now looked at in turn.

Changing information and guidance: businesses felt it was not feasible to fully prepare before January 2021 because of the limited availability of confirmed information on new requirements. Guidance was also seen to change regularly in response to changing policy and updated processes for cross-border trade, which made it difficult for businesses to stay updated and follow rules consistently.

Identifying the correct commodity codes: businesses thought there was no simple way to check whether commodity codes were correct, especially when selecting them on niche items. Those trading several products or components had to engage in significant extra work to confirm codes, and there were additional complexities with products coming from different countries. Businesses felt that HMRC helpline staff were not sufficiently knowledgeable to help, especially on less common goods.

A business with 1 to 9 employees said: “We have over 5,000 products that we deal with, so that it is a lot of codes!”

Following rules of origin: there could be uncertainty over what to do if products had been through different countries or its parts had multiple origins. Businesses complained about a lack of examples of how to complete forms and clarify requirements. Businesses also noted inconsistencies in the codes accepted in different EU countries (for example forms accepted in some countries, but not others).

A haulier said: “There is nowhere for us to see an example declaration form [for rules of origin], can we show these as one or 2 items, it is April and I still do not know!”

A sole trader said: “The history of an antique, all you can do is put down as much as you know about the truth, antiques have crossed about 6 borders before they reach their end customer!”

Sending documents in advance: the requirement to submit paperwork in advance meant businesses could not account for last minute order changes as they did prior to January 2021, as some reported that it was not possible to amend declarations on the system once submitted. Delays outside of the businesses control could render documents invalid.

5.3.2 External challenges during the trade journey

External challenges experiences during the trade journey included:

issues with groupage
haulier shortages
inconsistencies in paperwork accepted
complication with the transit system
the COVID-19 pandemic

Each of these will now be looked at in turn, starting with issues with groupage. Businesses and intermediaries reported experiencing issues with large mixed loads or groupage. In these instances, one item or package could stop or delay shipment of the whole load. For this reason they explained avoiding shipping mixed loads to avoid issues with any single item affecting the whole vehicle.

In terms of haulier shortages, both businesses and intermediaries noted a shortage of hauliers and trailer operators available to work in the UK. EU hauliers tended not to come to the UK because they did not understand requirements. Shortage of shipping containers also affected businesses.

A haulier said: “We tried to find experienced people, but all companies were in the same situation and there was just not enough people available, we wanted to hire people and nobody wanted to work with us!”

In terms of inconsistencies in paperwork accepted, businesses and intermediaries noted differences in paperwork allowed to clear shipments in different EU countries. There were also reports of Inland Border Facility staff giving inconsistent information about what was required and allowed through the border.

A customs agent said: “If you send an export document week one it goes through, if you send it week 2 it can be stopped and declared invalid. It just depends on the Border Force officer you get on the day.”

There were also complications with the transit system. T1 customs forms required to export to the EU had been in short supply in January 2021, leading to delays for businesses. There was also confusion about who was responsible for issuing T1 forms, with intermediaries querying why the UK were issuing them when they understood them to be an EU requirement. Some explained they had found a lack of awareness about these documents, with some drivers not using them.

Similarly, intermediaries explained transit documents were inconsistently used and accepted across the EU. Finally, businesses shared difficulties getting the Good Vehicle Movement Service (GVMS) system up and running and understanding processes related to it.

COVID-19 also caused issues as businesses and intermediaries attempted to trade in early 2021. The pandemic had impacts on businesses internal ways of working, as businesses explained having to focus on COVID-19 as an immediate threat to their business. Many had to rely on a reduced workforce to handle customs procedures as staff were furloughed or isolating. Social distancing and remote working guidelines also made staff training on new processes difficult.

COVID-19 also had wider effects on trade dynamics. It slowed down the information flow between businesses, suppliers, and intermediaries because of staff shortages and competing priorities. Hauliers were required to take tests at the border and the need to acquire a Kent Access Pass led to delays. Driver shortages were also due to COVID-19 to an extent, as some reportedly refused to come to the UK because of the new COVID-19 strain.

Finally, the pandemic appeared to have prompted some stockpiling behaviours, and the ongoing surplus of materials meant some businesses did not need to import in early 2021. However, businesses and intermediaries were generally unable to accurately attribute delays and wider impacts to COVID-19 or new customs procedures, which were likely to have confounded one another.

Question 6

6.  Businesses’ and intermediaries’ early support and information needs

Accepted Answer

This chapter outlines the types of support and information that businesses and intermediaries reported would be of benefit to them.

Businesses commonly articulated a continuous need for clear, basic guidance on the new process and requirements. They generally expected it to come from HMRC, which was seen as the main source of official information.

A business with 50 to 249 employees said: “A troubleshooting guide, really bog standard form telling us exactly what we need. In bullet points, just so simple.”

Across the sample, step by step summaries of requirements across the import and export journeys communicated factually and in plain English were sought, with little awareness of existing resources providing such support. They felt these would be helpful as language on HMRC’s website was often perceived as too technical and overwhelming.

Guidance tailored to different sectors (for example commodity codes) and business sizes would also be beneficial. Case studies would be valued to exemplify different scenarios and requirements in a relatable and more salient way. Finally, businesses would welcome information on recommended software suppliers, intermediaries, and declaration templates.

A business with 10 to 49 employees said: “We have to knit information together from various sources, HMRC should have on their website - this is your type of business, this is the information you need and these are the forms you need to fill in.”

Some of the needs and preferences for guidance and support were also specific to each mindset. For example, Unengaged businesses struggled to meaningfully engage with detail, and appreciated ways to identify and easily access relevant information, such as guidance broken down by sector or a search bar to filter information. An anonymous online chat could also be beneficial to explore questions businesses would not be comfortable to ask for fear of exposing inadvertent non-compliance to HMRC.

Anxious businesses were eager to engage with official guidance in an effective way. Some wanted information on processes which they perceived to be outdated removed. Some explained they would benefit from dummy guides, templates, checklists, and examples to help them complete processes and reinforce confidence that they were doing things right.

A business with 1 to 9 employees said: “The main thing was I didn’t know who to talk to. I just felt helpless […] I don’t really care [where information comes from] as long as I know how to get it!”

Delegators expected proactive guidance from others, and appreciated advice from specialist and knowledge organisations to reach out to them to feed them information on a need to know basis. Timely reminders from HMRC on requirements would be helpful to prompt action.

Methodical businesses required consistency as fluctuating information caused stress for them. In case of shifts in regulation or deadlines, they wanted to receive official updates, rather than having to find out themselves. They wanted distilled information provided by bodies like the Chamber of Commerce which had been helpful for these businesses and could be replicated by other official sources.

A business with 50 to 249 employees said: “[The government need to be clear when something is not confirmed] otherwise we are wasting time, a lot of information that was given, ended up not being relevant.”

Because of their expert role in supporting businesses, intermediaries primarily wanted to see improved support to resolve specialist issues and technical queries that they could not clear up themselves. They highlighted the need for a dedicated space providing specialist advice, and there were suggestions that this could be provided via a trained specialist HMRC helpline, as intermediaries felt current advisors had not had sufficient answers to their queries.

Intermediaries also expressed a need for further clarity on and resolution of problematic processes and external environment pain points (for example issues with transit).

A freight forwarder said: “What you’re getting now is people working for Customs who aren’t experienced. It’s not their fault though.”

A customs agent said: “It’s like these safety and security certificates. Knowing is one thing but finding it on the GOV.UK website, finding the mechanics of how I do it is often the problem.”

Question 7

7.  How businesses’ experiences evolved over time

Accepted Answer

This chapter outlines how businesses’ experiences of trade progressed between April and November 2021. It touches upon changes in business preparation, any shifts in dynamics related to the use of intermediaries, and ongoing pain points in the external environment to uncover the perceived impact of new customs controls for businesses.

7.1 Drivers of changes and ongoing challenges for businesses

Over the course of 2021, and by the time of fieldwork in October to November 2021, experiences of trade had generally improved, particularly for businesses dealing with routine, simple exchanges. A few more months had given them the opportunity to practice procedures, which allowed them to be confident and prepared. However, if businesses’ requirements were complex or changing from one trade to another they were more likely to continue to face challenges.

There were 3 factors that appeared to explain different experiences:

complexity of customs
consistency of requirements
frequency of trade

Each factor can be viewed as a spectrum, with businesses at the higher end facing additional challenges compared to those at the lower end.

When considering complexity of customs, those trading products involving additional processes and paperwork faced increased difficulties. These might include goods that are controlled, have multiple parts or countries of origin, or that are sent to different EU countries. On the other hand, completing simpler processes, such as businesses trading standard goods or products, single items and no parts, and a single destination delivery were more likely to have an easier experience.

In terms of consistency of requirements, businesses with changing needs for each trade were on the most complex end of the spectrum, while those with the same or similar procedures every time for every exchange were more likely to develop strategies to facilitate trade.

In terms of frequency of trade, a high frequency of trade (daily or weekly) contributed to increased difficulties as businesses had less time to resolve issues and prepare for new trade, especially if combined with highly complex and or changing requirements. A low frequency of trade (monthly to quarterly or less), while allowing more time for businesses to prepare and recover from any issues they may have encountered previously, could also be problematic if exchanges were so sporadic that businesses had acquired less meaningful experience in the new processes.

As described, these factors are interrelated, with multiple elements of complexity determining an overall more challenging experience. This is explored further in the next section, which describes how they interact with the other factors shaping businesses’ experiences of trade.

7.2 Revisiting factors affecting experiences of trade

Businesses’ preparation, the effectiveness of the relationships with intermediaries, and pain points in the external environment continued to play a role in influencing overall experiences of trade. The following sections revisit each stage and explore how businesses’ knowledge, practices, and challenges evolved over the course of 2021.

7.2.1 Business preparation

Trade between March and November 2021 allowed businesses to gain more clarity on customs expectations, and there were instances in which some businesses’ mindsets appeared to be shifting.

Unengaged businesses had an opportunity to familiarise themselves with requirements and moved to other mindsets, either experiencing high levels of stress and uncertainty about whether they were doing things right (Anxious) or starting to rely on others for confidence in their trading practices (Delegator).

Delegators were generally still comfortable relying on partners and intermediaries taking charge of processes on their behalf. However, in a couple of instances, they moved into a Methodical space, starting to gain more confidence to dedicate internal resources to customs requirements and take increased responsibility for trade, while still relying on partners.

Businesses had a better understanding of customs requirements for their goods, and the knowledge they acquired had also been helpful to fill gaps across their teams and networks. In particular, those supported by intermediaries appeared to be more skilled and prepared than before. Internal processes also became smoother as businesses had gained more experience and could apply it regularly.

While it had been difficult to get used to filling in declarations in many cases, processes had become more embedded as 2021 progressed. Businesses successfully identified and recorded additional information required for declarations. This was particularly straightforward for individual products or items, for which getting the required information (for example commodity codes) was easier.

A business with 50 to 249 employees said: “It’s got smoother with people knowing what’s meant to happen now, what the rules and regulations are and what’s needed […] from past shipments you get to know what you need and you’ve got it all in place.”

Several factors supported businesses’ confidence and preparation. Business networks, including sector groups, accountants, and intermediaries, played a critical role. They provided businesses with trusted expertise and digestible guidance, as well as practical support such as relevant forms and help sourcing codes.

Establishing a routine also helped businesses managing customs processes. This included setting up a system that worked for them around record keeping, communications, and taking care of declarations. Many continued following the same procedures that they knew were effective, building on and reinforcing their experience. However, it should be noted this could be challenging if they traded complex goods with changing requirements.

A business with 10 to 49 employees said: “We’re only really exporting one product…We can just go straight in; we know what the code is. We know what we’re doing.”

Some businesses dedicated specific staff to customs paperwork or supplying information to intermediaries, and found it beneficial, along with reviewing official HMRC guidance online. There were reports of businesses using online portals more to save time, however these were limited as businesses tended to rely on intermediaries to support with operations requiring software.

Businesses also appeared to be learning from previous challenging experiences. For instance, some limited frequency of trade to avoid being overwhelmed, avoided the large mixed loads which tended to generate groupage issues, and noted down challenges and their resolution for future reference. Many built flexibility in the process, for instance by communicating with clients and their supply chain about the possibility for longer timeframes, or planned deliveries and shipments in advance to be prepared.

However, businesses continued to learn on the job, as proactive information gathering and formal preparation were still challenging. As of November 2021, businesses appeared to be doing limited proactive searching, as most felt they had done all the independent research they could do. They perceived this as an additional job and did not want to devote additional resources to it. Overall, there appeared to be a tendency, even among Methodical businesses, to rely on troubleshooting to make changes and acquire more information.

A business with 1 to 9 employees said: “I’m a lot more need to know. When I need to know I’ll know!”

Businesses preferred making use of intermediaries and partners to resolve queries as they came up and to be fed information on a need-to-know basis, especially as some were not confident they would understand government guidance (particularly Anxious and Delegators businesses).

A business with 10 to 49 employees said: “We have not done anything specific to adjust, taking things one at a time, we are dealing with other problems as well. […] We haven’t taken a proactive approach to find out ourselves, usually we ask customs agents.”

Despite improvement in understanding and strategies to filter information there was uncertainty about the future, which caused ongoing concerns for businesses.

A business with 10 to 49 employees said: “We’re still not clear on the future developments, for example next year will there be any restrictions […] which rules will stop by the end of this year and which will continue into the future.”

Businesses were still looking for tailored support and clarity going into full customs controls. This included: simple information and instructions, tailored to businesses set ups and circumstances (particularly Anxious businesses); help troubleshooting and navigating unforeseen pain points (particularly Methodical businesses); targeted and timely prompts on changes and deadlines, although not too frequently to ensure salience and minimise volume of information; information on individual EU countries’ requirements; and clarity on requirements and restrictions post January 2022.

A business with 10 to 49 employees said: “Let them work out where all the potential pitfalls are and have a FAQ on each one.”

7.2.2 Transition from CHIEF to Customs Declaration Service (CDS) systems

Businesses were mostly unaware of the transition from CHIEF to CDS and expected their trade partners to advise them in due course.

Most businesses in the sample were unaware of the transition and had therefore not migrated to CDS. Those using intermediaries assumed they would get the system up to date on the businesses behalf. There was an expectation particularly among Delegators and some Anxious businesses who thought that they would be told by partners when needed, with no further action required from them directly.

Methodical businesses tended to be more interested in knowing what the transition meant for them, as they felt it was important for them to be aware. These businesses planned to check about it, but not until closer to the deadline.

Unaware businesses explained that for CDS to be beneficial, they would expect the system to simplify processes and reduce cost for them. However, there were concerns about the continued changes and the associated extra cost to their businesses, as well as the system not working.

Only one business of Methodical mindset was informed of the transition from CHIEF to CDS. They had migrated to the platform a year and a half ago when exploring how to manage all documentation related to trade online. They were using the same information system for the Rest of World (RoW) trade records, and it was beneficial to have them all in one place.

The business expected an increased use of CDS in the future, and while they had experienced some technical difficulties logging into the system, these had not been substantial.

This trader felt that additional, “bitesize” information on CDS would still be helpful, as keeping up to date with changes could be challenging for a small business.

7.2.3 Effectiveness of the relationship with intermediaries

Intermediary support had been critical to businesses’ successful trading experiences over the course of 2021. There was a sense among businesses that intermediaries were more informed and helpful, and that they had improved their processes and logistics compared to earlier in the year (for example access to private areas on intermediaries’ websites, quicker paperwork, more efficient service). While the cost of intermediaries was still top of mind for businesses the dominant view was that it was worth it and ultimately saving resources, both in terms of internal time and cost of software infrastructure.

A business with 10 to 49 employees said: “[Their intermediary] They’re growing with it and they’re getting better every day.”

Intermediaries also crucially continued to provide reassurance for businesses. They relieved stress and effort, despite some businesses (particularly Anxious and Methodical) still feeling responsibility as they were the ones providing the information for paperwork.

A business with 10 to 49 employees said: “[The intermediary] takes away all the stresses and tribulations for me.”

Intermediaries’ knowledge and professional support was not only relevant for paperwork, but also to delivery logistics, a crucial aspect for businesses. When the relationship was established this conveyed extra peace of mind, as intermediaries had a valuable understanding of the business, its practices, and needs. Along with consolidated ways of working, this also contributed to saving time.

Some challenges connected with the use of intermediaries continued. There was a sense among some businesses that intermediaries were still not fully knowledgeable on requirements at the time of fieldwork, because of a limited ability to explain certain requirements, or conflicting advice from different members of staff.

Ongoing delays and limited communication around them, left some businesses unclear about their shipment’s progress and unable to track delivery, undermining confidence in intermediaries. Resolving issues when things went wrong could also be complicated, and the significant surcharges left some businesses feeling that intermediaries were taking advantage of the market.

While businesses continued to rely on intermediaries despite issues, businesses responded to them by adopting different practices. This included switching intermediaries (for example between haulier and customs agents) to receive a better customer service, or expanding their portfolio to assign them to different trades playing to their strengths.

Businesses who were able to do paperwork themselves also started seeking intermediaries for advice only. However, it seemed that many were no longer responsive to these requests without the prospect of supporting with declarations. Some businesses had plans to move to managing independently in the near future to reduce cost and gain more control, but it should be noted that the reassurance provided by intermediaries remained important for many.

7.2.4 External factors

While businesses generally reported better experiences of trading in late 2021, some external pain points remained, particularly for complex goods and special delivery requirements. These included:

completing documentation
ongoing inconsistencies in EU countries’ approaches
issues with trade costs and duties
delivery delays

In terms of completing documentation, sourcing commodity codes for complex items or controlled goods was still challenging. In addition, businesses also referred to other issues such as identifying the correct rules of origin for products with multiple parts or origin countries, and the inability to amend documents once sent to accommodate last minute changes.

In terms of ongoing inconsistencies in EU countries’ approaches, businesses continued to note differences in paperwork accepted in different EU countries (for example commodity codes for chemical goods, information accepted in certain countries but not others). There were difficulties getting goods across multiple borders into EU countries, especially for controlled goods for which paperwork is more stringent. Some also found that different administrations provided conflicting information on certain requirements.

A business with 10 to 49 employees said: “There seems to be a lot of confusion their end on what the processes are. Different countries have taken up the rules in different ways.”

When considering trade costs and duties, some businesses noted customers complained or refused to pay for extra duties, which had financial implications for them. Import taxes applied by certain EU countries on EU customers could also be seen as restrictive and unjustified.

In terms of delivery delays, controlled goods (for example chemicals) took longer to clear than expected, with additional issues with paperwork. Groupage issues and goods being held back were still causing delays. Generally delays at the border seem to have decreased as of November 2021.

7.3 Perceived impact on businesses

Businesses reported experiencing a number of impacts from new customs controls for trade with the EU, but they were not able to comment on whether they would be lasting or temporary. It was hard for businesses to clearly attribute their experiences to a single cause as it was hard to unpick the influence of new customs processes alone. Other factors, including COVID-19 and wider market trends (for example, the move to fewer deliveries for sustainability reasons) were also seen to play a role in challenges and impacts experienced.

Overall, there was a sense that trade was picking up after slower pace and perceived hesitation in the first few months of 2021, and businesses updated their practices, adjusting timings of shipments, or planning ahead and ordering imports early to take account of new processes.

A business with 1 to 9 employees said: “I’m not doing as much, as many journeys. I’m not sending couriers every week. I’m just going every 3 or 4 months sending a larger load.”

However, businesses felt that the increased costs associated with trade were affecting profit margins as they were spending more time on admin and gathering information and some of their revenue on duties and intermediaries cost. Some had concerns about their reputation due to shipment delays and increased cost of trade for clients. Changes to their supply chain meant that some clients preferred EU competitors or businesses moved to different suppliers because of cost and delays.

Question 8

8.  Understanding businesses’ needs and preferences for the future

Accepted Answer

This chapter explores findings from the focus groups run with businesses to understand their needs and preferences for the future around 3 main topics:

businesses’ expectations and preferences on the role of HMRC with regards to trade
their decisions and considerations on using intermediaries and what would support these
facilitators and barriers to the adoption of authorisation and ideas to improve these processes

8.1 The role of HMRC

Businesses saw HMRC’s current role primarily as enforcing trade rules and administering customs processes. As enforcers, HMRC was seen to be setting regulations, conducting customs and excise checks, and ensuring new requirements were kept to. HMRC was seen as the one with the correct answers in an environment crowded with confusing guidance and information. However, involvement in enforcement could make businesses wary of approaching HMRC for guidance and support for fear of repercussion in case of ignorance or mistakes.

A participant in the managing independently group said: “It’s always a worry that you’re going to have missed something out or you’re going to have not completed the paperwork properly if it’s changed at all.”

Businesses also expected HMRC to provide forms and documents required to follow processes correctly. Generally, businesses using intermediaries were unaware of where to find these types of tools, while those managing independently were more aware.

A participant in the low frequency of trade group said: “They have to be the first port of call; they created the rules and regulations and what you need to do.”

They looked to HMRC for guidance and support and expected them to provide both generic and business-specific information. Widely applicable information included overviews of the ‘journey’ of cross-border trade, outlines of paperwork needed to get through customs, and communications about any upcoming changes to rules and regulations.

Business specific information businesses wanted from HMRC included information required to resolve contradictions with other sources (for example intermediaries, clients, suppliers), guidance on how to complete paperwork based on specific circumstances, help with problem resolution and specific queries (for example on commodity codes or rules of origin).

However, businesses highlighted limitations of the information currently provided by HMRC, which they felt could be improved. Accessing business-specific information could be challenging for businesses, who felt HMRC tends to provide ‘blanket support’ for all business types and requirements. Targeted information relating to specific sectors or smaller businesses was perceived as limited and it could be hard for businesses to identify guidance relevant specifically to their set up or type of trade.

Businesses saw HMRC as an official and reliable source of directions on correct customs processes, but information they provided was not considered digestible. Businesses discussed the need for more tools to help them break down information into sizeable chunks, and felt the language used could also be simplified to facilitate their understanding.

While businesses generally thought that HMRC could be doing more to support them, there was some recognition that their role in enforcement could make this difficult. There was a feeling from a small number of businesses that HMRC would face a conflict of interest by actively supporting businesses through customs processes, making providing individualised support problematic. For these businesses, guidance and signposting towards reputable resources was considered a sufficient improvement.

However, the dominant view was that HMRC could do more to provide effective support beyond information. Many referenced other areas of their business where they felt more supported by HMRC, for example referencing direct support from HMRC helplines on how to meet their domestic tax obligations.

Overall, businesses wanted guidance and support from HMRC to be more tailored and identified a number of ways to do this. These included:

providing more visual support resources such as images of how forms should be completed, screengrabs of the correct form in different situations, and YouTube video tutorials
additional training on how to access and operate systems (CHIEF and CDS)
being able to subscribe to email chains for updates and support as they did with the COVID-19 support scheme
tools to filter information based on their set ups and needs

Businesses would also welcome more direct reassurance from HMRC, for instance being able to upload forms to ask questions or share screens with an advisor to confirm actions. There was a request to be able to systematically confirm their processes in conversations akin to audit checks.

A participant from the high frequency of trade group said: “It would be great if we could upload a form and then ask the specific questions we have.”

8.1.1 Trade guidance and support from other organisations

Businesses also saw a role for other government departments and staff, experts, and their own networks in helping them with cross-border trade.

Within government, the Department for International Trade (DIT) was seen as having a role in administrating processes, providing guidance, and supporting businesses. Businesses felt that the enforcement of trade regulations was within trading standards agencies’ and port staffs’ remit and identified government licencing departments as additional sources of guidance.

Trade associations (for example BIFA), professional membership organisations and experts in controlled goods were raised by businesses as important sector and professional experts, able to provide guidance and support through the trade journey. Chambers of Commerce were also seen to have this role, along with contributing to administering customs processes.

Finally, business’ more immediate networks served a variety of functions. Intermediaries were seen as involved in all aspects of trade including, administering trade flows, enforcing rules, and providing information and support. Suppliers had a role in clarifying admin requirements and sharing guidance, while informal business networks were seen as critical to provide advice and support (although this could sometimes be incorrect). Finally, experts and professionals (for example accountants) within businesses supported their functions and acted on behalf of HMRC to make sure rules were followed.

8.2 Decisions on intermediaries

Businesses that used intermediaries tended to do so to offset difficulties faced in cross-border trade with the EU. Businesses felt reassured working with experts in an area where they felt they did not have the required skills (as they focussed on the business core functions), knowing that trade processes were being followed consistently by a trusted partner. This reduced stress for them and worries about incurring delays and sanctions.

Another reason to rely on intermediaries was linked to resourcing needs. Managing cross-border trade requirements was considered a heavy burden for staff, and particularly smaller businesses with few employees could find it hard to find resource within the business to dedicate to trade. Combined to this, businesses generally thought they lacked the in-depth knowledge to effectively manage processes internally (for example limited understanding of requirements to clear goods). They could also struggle to find ‘simple lists’ to help them upskill, and sometimes could not access systems like CHIEF themselves.

A participant from the intermediary use group said: “We’re a small company so it doesn’t make sense for us to do it in house. We haven’t got the expertise in house.”

Businesses used a variety of methods to find a suitable intermediary and tended to find the process relatively simple. These included carrying out online research on dedicated forums and reading reviews; relying on word of mouth and experiences from others in the industry; trusting long standing relationships with an existing intermediary; or being approached by and discussing options with intermediaries they had not previously used.

Business decisions were then driven by different factors. Price was an important consideration, especially as costs to businesses were rising in other areas. Reputation within their networks and industry more widely was also fundamental. Intermediaries’ approach to problem resolution in interviews and their experience helped to build a picture of this, as well as information businesses found reading reviews or through their networks.

When businesses and intermediaries had an ongoing relationship, this could build reassurance over their consistency, customer service, or knowledge of business-specific processes. This helped businesses making a judgement over the quality of intermediaries’ work and the effectiveness of their support.

Those currently managing independently felt that they would be encouraged to use intermediaries if intermediaries service was improved, or if border processes were to go through more changes. Improvements to intermediaries’ practices that would make those not currently relying on intermediaries to consider using them included better customer service, for example consistently making deliveries within the time expected, providing targeted news bulletins for businesses around their size or in their sector (which businesses felt were currently missing), or reduced charges.

Businesses also felt that if they were to increase the frequency or value of EU trade, they may have to turn to intermediaries to manage it effectively.

A participant from the manage independently group said: “I might be more inclined to give them work if they did what we signed up to every time.”

On the other hand, businesses currently supported by intermediaries felt they would scale down their reliance on them if they were better able to complete processes themselves, if intermediaries started making regular mistakes, or if their fees increased significantly. Businesses felt that simpler trading processes and more accessible training on how to complete them themselves would be required to build their confidence.

A participant from the intermediary use group said: “If they started dropping the ball, like if parcels were getting returned or we got incorrect charges, I would reconsider.”

Businesses generally appeared to be able to manage trade independently where they had both the knowledge and resource. Businesses who had a team or member of staff with trade expertise had more confidence in their ability.

Similarly, those with simpler goods or trading requirements (see section 7.1 for more detail) were able to quickly learn processes they could easily replicate at a lower cost. When businesses had been able to adapt to processes through experience or had been taught the correct procedures by intermediaries they could sometimes reduce their reliance over time.

Some businesses were taking actions to upskill and build their confidence. These included learning and taking advice from intermediaries that they could then action independently (for example replicating forms completed by intermediaries); completing online training provided by professional or expert organisations; employing staff with specific trade expertise; or assigning dedicated existing resource within the team to cross-border trade.

However, there was also uncertainty among some businesses about what could be done to upskill, which could cause feelings of anxiety within the businesses if relying on intermediaries was not efficient for them.

Despite taking these actions businesses also highlighted concerns that their confidence and ability to carry out processes independently would dwindle if new processes came into place.

A participant from the manage independently group said: “Now they’ve the changed the rules slightly, so I’m back to that position where I’m doing it but there’s a nagging voice in my head saying you’ve done it all wrong.”

8.2.1 Approach to payment cycles

Businesses reported no concerns with payment cycles, suggesting this is not a priority for them in terms of process simplification.

Managing payments was generally considered part running their business. As payments were factored into regular accounting procedures, this caused very little if any concern.

A participant from the intermediary use group said: “It’s just another bill, isn’t it, one of many.”

Businesses also generally had figures such as accountants or finance directors in place to manage these processes and tended to trust their expertise with little additional involvement.

A participant from the intermediary use group said: “It doesn’t cross my mind. I wouldn’t micromanage it.”

8.3 Use of authorisations

Customs authorisations are granted to businesses and intermediaries involved in moving goods across the UK border so they can use customs regimes and procedures. In some instances, authorisations are necessary to enable the holder to perform particular activities, such as weighing goods to calculate the duty owed, or storing goods from outside the UK temporarily under customs control before they are released to general circulation.

In other instances, authorisations are optional and might enable holders to access simplified customs procedures or cost saving opportunities, such as reducing the financial guarantee required to operate a duty deferment account.

Businesses, including those who had previously used authorisations, were generally unaware of what they were or whether they held them until given further information. This suggested a lack of clarity around the terminology used to refer to the authorisation process. Those not using authorisations appeared particularly confused and unsure about their purpose.

A participant from the using authorisations group said: “I’m not sure [if I use authorisations]. I don’t understand what you mean by the term.”

A participant from the manage independently group said: “You wouldn’t expect HMRC to expect you to have to go out to get information, you would expect them to provide it.”

The most common reason businesses gave for using authorisations was to improve cash flow. Some businesses had been informed by intermediaries that authorisations would benefit them as the intermediaries would then take charge of all required set up actions, so that requesting authorisations required little to no effort by the businesses. Many noted that once the process was in place, it could be easily replicated. There were also instances when authorisation use was required by customers (for example for supermarkets).

A participant from the authorisations group was quoted said: “It all helps with cashflow.”

Among those not using authorisations, lack of awareness was a significant barrier to take up. However, even when these businesses had heard about authorisations, they tended not to consider them a priority. Businesses preferred to focus on other operations and spend time on core functions.

Particularly as businesses were facing several other challenges taking up time and resource (for example effects of COVID-19, issues with supply chains), and authorisations were seen as an additional process to manage. There was also a sense, particularly among smaller businesses, that authorisations would not be relevant for them.

A participant from the high frequency of trade group said: “I looked into it yes, but I don’t think we’re big enough for these to work for us.”

Those using authorisations also highlighted a few difficulties with their process. Many found it complex and lengthy overall, and highlighted a high potential for making mistakes, particularly when handling the inward processing procedure. There were also issues accessing authorisations in a first place, as the sign up process was considered too strict and rigorous. Some noted approval times could be significant (for example over 4 months) and felt processing requests should be more straightforward to minimise impact for businesses.

A participant from the authorisations group said: “It’s longwinded. The whole process is too lengthy.”

Businesses also reported challenges sourcing and understanding guidance, linked to the overall complexity and variety of authorisations available. They felt that when searching for materials and instructions on authorisations the high volume of information confused them, making research burdensome. They struggled to understand what was relevant for them and to unpick requirements, and the technical terminology was difficult to digest.

A participant from the authorisations group said: “It’s quite mind-blowingly hard to work out.”

A participant from the authorisations group said: “I think you have to read it an awful lot of times just to get the gist of it! You have to read the whole thing to find what’s relevant to you.”

Businesses noted several ways in which messages around authorisations could be improved and their processes simplified. These included:

Clarity on authorisations’ purposes, benefits, and requirements. Businesses explained they would benefit from more concise, complete, and straightforward explanations of what authorisations are, why businesses should and or would want to engage with them, and what they need to take do efficiently do so to increase salience.

A participant from the intermediary use group said: “A lot of with HMRC is, they mention it, but you’ve then got to go off and find out how to do it. So it only tells you half of the strategy.”

Support throughout the application processes. There were suggestions of a ‘Question and Answer’ tool businesses could access at the start of the application for them to easily find relevant information based on their sector, size, and trade needs. Providing supporting information for applications, for example practical advice on how to complete different elements of the application could also be beneficial.

Streamline processes. Businesses felt there would be value in considering how authorisations processes could remove barriers to make them more appealing and a higher priority for businesses. Shortening waiting times for authorisation approvals should be part of this.

A participant from the manage independently group said: “If we’re going to bring it in house if this simplifies the process then that’s bound to be a benefit. I don’t want to over complicate things so if you’ve got a means of making things simpler…”

Question 9

9.  Conclusions

Accepted Answer

The following sections explore the role HMRC could play in supporting businesses with ongoing challenges experienced with trade, how more effective selection and relationships with intermediaries could be facilitated, and suggested improvements to authorisation processes in light of findings from the research.

9.1 Businesses’ challenges and role of HMRC

Over the course of 2021 trade improved for businesses with simple trading requirements who were able to practice procedures relevant for them, build confidence in processes, and manage setbacks. However, challenges continued for others with complex requirements or niche products. These related to difficulties in preparation, relationships with intermediaries, and external systems and processes, and in extreme cases they made it no longer viable for businesses to continue trade with their EU partners.

Businesses felt HMRC could do more to provide or raise awareness of tools to manage or resolve ongoing issues. This included:

providing clearer instructions on documentation and other requirements taking account of business structures, type of goods, or sector
ensuring additional training resources
if possible, providing a helpline service similar to that provided for tax

As businesses could find the volume of information on customs controls overwhelming and only act on it when required depending on their trading deadlines, timely prompts and simplified guidance should be considered to maximise salience and understanding.

9.2 Facilitating effective intermediary support

Intermediaries played a critical role enabling positive experiences of trade for businesses who relied heavily on them at different stages. Businesses had established strategies to support their decision making around intermediary usage and tended to take advantage of personal experience or their network’s recommendations to choose an intermediary. However, it seemed there could be scope to provide further opportunities to explore options available to meet businesses’ needs.

Uncertainty and limited understanding of customs processes could create significant worry for businesses. For this reason, businesses wishing to upskill and increasingly manage trade independently will likely require additional support to build their confidence in customs procedures and in finding resource to complete them.

As businesses reported no concerns with payment cycles, this does not appear to be a priority for process simplification.

9.3 Understanding authorisations use

Terminology around the concept of authorisations and their application could be inaccessible for businesses. This created confusion on what authorisations were even among those who used them, suggesting the need for clearer and more consistent language to refer to them and their components.

Authorisations users also found aspects of the process be complicated, suggesting that simplifying guidance combined with more streamlined completion and approval processes would be desirable.

It seemed that highlighting in official messages when authorisations are needed, what business circumstances they apply to, and (for those which are optional) their benefits, could also be helpful to overcome the reluctance and concerns of some businesses not using them, encouraging adoption when relevant.

Under Staged Customs Controls, those importing non-controlled goods could choose the to delay their full customs declarations. Importers making use of this staged approach were expected to keep records of goods moved since January 2021 and required to submit supplementary declarations within 175 days of the goods entering Great Britain. Staged Customs Controls ended in 2021 with a new regime requiring businesses to complete customs declarations and pay duties on goods, referred to as full customs controls, starting on 1 January 2022. This entailed changes in customs requirements for exports to the EU and imports of controlled goods (products such as excise goods, drugs, chemicals, weapons, or animal products) which are subjected to more stringent checks. The transition to full customs controls for all businesses, initially planned to start on 1 July 2021, was delayed to 1 January 2022 by a government announcement in March 2021. This extended the availability of deferred declarations to January 2022 for eligible goods, meaning businesses still had up to 6 months from the time of import to submit supplementary declarations and required records. ↩