Posted by: John Brace | 4th August 2019

What are the dates of the 6 RMT strike days on the Merseyrail network and will the £273 million cost of the new trains rise if the UK leaves the EU?

What are the dates of the 6 RMT strike days on the Merseyrail network and will the £273 million cost of the new trains rise if the UK leaves the EU?

                                     

Stadler invoice to Merseytravel 18th February 2019 £5,468,499.05

Stadler Bussnang AG invoice to Merseytravel 18th February 2019 £5,468,499.05

Above is an invoice paid in March 2019 for 2% of the value of 52 new class 777 trains that Merseytravel are buying from Stadler Bussnang AG. This invoice was released to us on the 12th July 2019 as part of a request made using the Local Audit and Accountability Act 2014 in relation to the 2018-19 financial year. The invoice was requested as part of a collaborative journalism project with the Bureau of Investigative Journalism’s Bureau Local project.

Since then two further payments of £513,557.92 and £513,558.00 (a total of a further £1,027,115.92) have been paid to Stadler Bussnang AG in April 2019 for invoices both dated 12th April 2019.

What you may not be able to read too well on the invoice above since it was resized and compressed is the following, “Intracommunity supply of goods according to Article 138 of Council Directive 2006/112/EC”.

Although outside the EU, as Stadler Bussnang AG is a company based in Switzerland it is considered to be part of the European Single Market as Merseytravel is based in the UK (within the EU) which is also part of the European Single Market.

However if the UK left the EU before either all 52 class 777 trains were paid for or received in the UK, it is possible that the original approximately £273 million price of the trains would increase due to tariffs imposed by the UK and/or Swiss governments. VAT wouldn’t be charged, but the level of tariffs (if any) remain unknown.

The RMT (Rail and Maritime Union) have announced a series of six 24-hour strikes. The reason for the strikes relates to the introduction of the new class 777 trains expected to enter service starting in 2020. The decision to buy the new trains was agreed by the Liverpool City Combined Authority on 16th December 2016 and a contract between Merseytravel and Stadler Bussnang AG was signed in February 2017. The strike is about how this impacts the future positions and role of the guard. Talks between the RMT and Merseyrail (facilitated by ACAS) have broken down.

Strike dates that have been announced will (unless called off) happen on Saturday 24 August 2019, Tuesday 3 September 2019, Thursday 5 September 2019, Monday 30 September 2019, Wednesday 2 October 2019 and Friday 4 October 2019.

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Responses

  1. Interesting scenario John, I work for a small business who rely on the EU supply chain for some of its stock, including Switzerland. Because of the arrangement Switzerland has with the EU we do not pay any import duties or input tax (VAT the goverment charge to the business importing the goods).

    When we import directly from a non-EU country like Canada, the goods in our sector are subject to import duty of 3.2% plus input tax (VAT) at 20% on the amount of import duty.

    So if the declared value of our goods at the UK border is £2000 then then HMRC charge 3.2% tariff which is £64. Then they charge input tax at 20% on the tariff which is £12.80.

    The real-world process works like this:

    The supplier in Canada has to choose a courier service who operate both in Canada and the UK which is usually DHL. The price they pay to DHL will have been included in the price they have charged us for the goods. The supplier in Canada pays DHL to pick up their goods and supply the paperwork for export to the UK. DHL at the UK Border Control receive the goods and start to process it.

    DHL in the UK work with UK Customs & Excise and apply the appropriate import duty (3.2% of the declared value in our particular goods sector) and input tax, then pay those duties directly to HMRC. This usually takes 2-3 days to process as we are dealing in few large boxes, so nothing like the volume compared to say, a supermarket chain. So DHL are processing the goods on our behalf and getting the goods released from Customs & Excise so we can receive them.

    DHL bill us for the import duty and input tax they have paid on our behalf, plus a fee for processing our goods. We pay the bill and receive our goods, plus a C79 form showing the import duty and input tax paid on the imported goods.

    The bottom line is, any costs of importing the goods are added into the retail price of the goods. The customer pays at the end of the day or there is no profit margin for the business to survive on.

    Should we leave the EU without an agreement with those countries in the single market, then we could assume Merseytravel will have to operate under WTO rules and import directly from Switzerland. I guess Switzerland have the best of both worlds as they can sell directly into the single market and outside of it.

    I don’t know what trains are classed as under WTO tariffs but they won’t be released from Customs & Excise for delivery to Merseytravel until the appropriate tariff has been paid on its declared value, plus input tax. Merseytravel will have to pay for this and recoup the extra cost from their customers somewhere down the line.

    • Thanks for that comment.

      Yes, you’re right that at the moment goods (such as the rolling stock that Merseytravel have ordered) can be imported to the UK from Switzerland without import and export duties being levied due to the UK’s status as being in the EU.

      We import services from Canada (website hosting) – VAT of 20% gets charged on the full amount.

      I did check the WTO tarriffs for importing rolling stock (trains) exported from Switzerland. At the moment to the UK it was 0% (presumably because of its status as being in the EU), but to different countries outside the EU it varied.

      • I guess a WTO tariff on importing rolling stock would have to be set at a fair rate for the UK in line with other non-EU countries. I wonder if Merseytravel may delay delivery until we know more about the UK’s future trading arrangements? Unless of course, they can somehow take delivery before/if we leave.


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