Brexit’s impact on mail and goods transported to Malta
The end of the Brexit transitionary period came about in the middle of the Covid-19 pandemic, with both events causing issues for mail, packages and goods being transported from the UK to Malta.
MaltaPost’s Chief Operations Officer, Adrian Vassallo, was asked to detail how post and packages have been affected by Brexit. As a result of the Trade and Cooperation Agreement between the EU and UK following Brexit, he explained, the UK is no longer part of the EU’s single market and customs union and new rules apply.
“As from 1 January, the UK extended the rules which applied to non-EU postal items before. Similarly, the EU now treats postal items from the UK as it did non-EU items before. Therefore, and following the end of the transitionary period, all items containing items of value, bought or despatched from the UK after 31 December 2020, may be inspected by local Customs authorities and any VAT, Duties and applicable processing fees may be charged depending on the value of the items themselves and the shipping costs incurred.”
He was asked to provide details about the Duty and VAT situation, as well as to predict whether this will result in a reduction in the number of packages being ordered from the UK.
“For items arriving from the UK where the item value is greater than €22, VAT (currently at 18% except for books where VAT rate is 5%) needs to be paid. The VAT threshold for gifts is set to €45 instead of €22. Additionally, if the item value exceeds €150, customs’ duty is to be paid if the item was manufactured outside the EU and outside the UK.” He explained that if the item was manufactured in the UK, then it will likely not be subject to customs’ duty.
On this particular issue, the Customs Department had said in a statement that “if goods originate in the UK, one may be able to claim a preferential rate of duty when these are imported into Malta and released for free circulation. This means they’ll be free (or benefit from a reduced rate) of Customs Duty. VAT will still be due on import. To claim preferential rates of duty, the imported product must originate in the UK (as the exporting country).”
Vassallo added that a Customs’ processing fee is also charged by the postal/courier operator to cover the costs associated with the customs’ clearance process. “It must however also be registered that UK sellers may reduce the 20% VAT at checkout if the item is to be exported outside the UK.”
With regards to the prediction, he said that MaltaPost is monitoring the market on a daily basis “and it is still too early reach certain conclusions. We do expect to experience a shift in the consumer behaviour by witnessing more orders from EU-based websites instead of from UK websites.”
Vassallo was also asked whether the Maltese public can expect delays in receiving packages and mail as a result of Brexit.
“Had we been living under ‘normal’ circumstances (i.e. without the pandemic and the effects the pandemic caused), the only delay that may be experienced by the clients would be related to the Customs clearance process. Clients are presently experiencing additional delays due to the effects of the pandemic. For example, the border between the UK and the EU was closed between Christmas and New Year following the discovery of the more contagious strain of Covid-19 in the UK. The pandemic has also greatly affected the number of flights across the world. If we had to take the UK as an example, whereas a few months ago the national airline used to fly over three times a day to the UK, today there are only three flights in a week. This greatly reduced air cargo carrying capacity is creating delays as there is more demand than capacity. Suffice to say that we are still receiving mail dispatched from the UK in December. The lack of flights is also similarly affecting mail coming from other countries as well as all outgoing mail.”
Asked to further detail how Brexit has affected MaltaPost operations, Vassallo reassured that “MaltaPost is well organised, manned and equipped to handle the extensive operational changes that had to be implemented at the end of the transition period, given that we receive and send mail and parcels to both EU and non-EU countries. Today, mail from and to the UK is processed as all the other mail coming from or leaving for other non-EU countries. This change has increased our workload, but we are geared up to handle it. That said, the delivery of items from the UK to Malta may take longer as there is an additional step ie the local Customs inspection process. “
The same applies when sending items to the UK. “If a Maltese seller or company is sending an item valued between 0 GBP and 135 GBP, the Maltese seller needs to have a UK EORI number and must charge the UK buyer the UK VAT during the purchase process. The seller will then be required to declare the UK VAT with HMRC (UK Customs). For items whose value is greater than 135 GBP, UK VAT is paid by the addressee in the UK. Letters, postcards and documents are usually exempt.”
“As a consequence of the end of the transition period, MaltaPost is now obliged to transmit the customs’ related information electronically to Royal Mail. This information must be compiled in an appropriate format prior to despatch to include information such as what their value is, who the sender and receiver are etc. To speed up the process and to avoid spending unnecessary time at the Maltapost Post Offices, one can also declare their items from the comfort of their home or office by following this link www.maltapost.com/sendyouritem.”
The CEO of transport and logistics operator Express Trailers, Franco Azzopardi, explained how Brexit has affected his sector. He described it as ‘deja-vu’ of the way things were handled between Malta and the UK prior to Malta joining the EU, with “loads of paperwork and control procedures.”
“When a non-EU country is exporting into the EU, duty tariffs are normally chargeable by the importing or receiving country’s Customs department. As soon as the goods cross the border into the EU, technically, duty should be levied at that time. However, there are concessions that postpone the collection of duty until the cargo arrives at the country they are destined for. The carrier, like our company, is therefore burdened with the responsibility of carrying goods that should have been levied with duty upon entering the EU, but which will be customs-cleared on crossing the border of the importing country. So, anything being imported by a Maltese business from the UK, will, save for particular cases depending on the country of origin (manufacture) of the goods being the UK, have to be levied with duty by the Customs authorities.” He said that the way the EU manages this is that the carrier is given a 'free circulation' document to be able to carry the goods through and across the borders of other EU countries up until the cargo is cleared for customs purposes in Malta.
“Hence the exporter, in this case the UK seller, has to prepare all documentation and upload information to digital systems that have been implemented as part of Brexit and which are still being tested with all the teething troubles and learning curves of the British exporters and authorities. We too are now burdened with dutiable cargo, crossing the border from the UK into the EU, with all the passes and checks just like travellers will have to undergo at the airport when entering the EU. This is a very simplified explanation of the complexities that have been brought about as a consequence of Brexit. I am not even skimming the surface when we start talking about waiting times, delays, empty volumes that cannot be loaded because of closed paperwork, glitches in the systems, preparation of all the documentation both in the UK and then to clear the cargo in Malta, the higher risks and insurance costs to cover duty apart from the value of cargo in case there is loss or damage in transit.”
“To top it all off, the British have also changed the 'cabotage' rules which is basically nothing more than a protectionist approach for the British hauliers (a similar rule exists for us in Europe). Whereas in the EU we can only make 3 stops (collections or drop-offs) in a particular country within 7 days, the UK has tightened this to 2 stops in 7 days. This continues to add to the compendium of difficulties logistics is going through and facing.”
He said that Brexit is causing delays, and that they are working to find solutions and work arounds.
Nikol Sammut, from Alf Mizzi and Sons, a food distribution company, spoke of Brexit’s impacts on their operation.
“It appears that the only impacts are the increase in costs of goods containing products of animal origin, as veterinary certificates will be required.” He also said that they still need to see whether haulage/transport costs will increase due to delays at frontiers.
“The deal between UK & EU has ensured that there will be no tariffs on the transfer of goods between the two trading blocs. No significant impact is anticipated at this stage unless new non-tariff barriers are imposed.”