A majority of small international traders do not have the dedicated manpower required to handle complex customs paperwork and need to turn to high-cost intermediaries, according to new research by the Federation of Small Businesses (FSB).
The findings came out recently on International Micro, Small and Media-Sized Enterprises (MSME) Day, a United Nations-led campaign to recognise the crucial role small firms play in the global economy.
FSB’s Customs Clearance report finds that the smaller the businesses, the less likely they are to have in-house resources for customs and trade – only 9% of small firms have a dedicated staff member or team customs procedures. Of these firms, four in ten (38%) have more than 50 employees.
Seven in ten (71%) small exporters and importers say they use an intermediary for at least some of the process of handling customs declarations, compared to just a quarter (24%) that handle the entire process in-house.
Fast parcel operator (60%) is the most widely used type of intermediary by small international traders, followed by freight forwarder (50%) and customs agents/broker (26%).
As businesses are adjusting to the new UK-EU trade relationship, small international traders say they have been asked to pay fees attributed to post-Brexit paperwork, but in many cases there is a lack of clarity from intermediaries on what exactly these extra costs are for. A third of respondents cite high intermediary fees as a challenge for overseas trade.
Despite facing higher costs, many small businesses say they will continue to rely on intermediates to export and import. Four in ten (39%) explain this is because they do not have the expertise required to handle customs declarations, while over half (57%) say footing the extra bill would free up their time for other tasks.
FSB sets out a list of recommendations to bring down the costs and barriers of international trade in the report, including:
- Building a small business-friendly Single Trade Window, an online portal delivering a ‘once and done’ approach to Government data collection.
- Targeting business support towards those with high export potential, and those in sectors that say they find a lack of guidance particularly difficult.
- Monitor potential anti-competitive behaviour resulting from supply chain disruption via the Competition and Markets Authority Five Eyes working group.
- Adopting a ‘think small first’ approach to customs policy development, including robust piloting and staggered implementation timelines. Government should also commit to raising the de minimis customs duty threshold to £1,000.
FSB Policy Chair Tina McKenzie said: “The fact that small firms say they will continue to use intermediaries to export and import despite increasing costs shows a strong zeal for international trade. Unlike big corporates, most small firms don’t have the specialised resources needed to deal with complex customs procedures, so they’re dependent on intermediaries. Smaller businesses may also have to bear higher costs as they are unable to commit to large volume and less able to reach fixed price agreements or to negotiate with couriers.
“A flourishing, competitive, and user-friendly intermediary market is vital to small firms. It’s therefore welcome to see the on-going government consultation on introducing voluntary standards for customs intermediaries to improve the quality of service provided.
“There’s also a need for an effective and streamlined trade infrastructure with clear guidance to help reduce the costs of trade. This will unleash the export potential of small international traders as well as encouraging more businesses to sell overseas.
“Small firms’ appetite to explore new markets and tackle trade barriers means there is reason to be optimistic about the future of SME international trade, and policymakers should make the most of this opportunity.”