Will Waters | Monday, 12 October 2020
Many international traders, especially SMEs, still lack sufficiently clear information about what to do before Great Britain’s exit from the EU’s single market and customs union on 1 January, according to one well-placed UK logistics consultant
UK importers and exporters, and those that trade with and represent them, must act now to prepare and protect their businesses and secure their trade with their EU suppliers and customers ahead of the significant process changes at the end of this year, when the UK’s transition period from European Union (EU) rules expires. But many companies, especially small and medium enterprises (SME), still lack sufficiently clear information about what to do before Great Britain’s exit from the EU’s single market and customs union from 1 January and urgently need a simple guide to Brexit preparations, according to one well-placed UK logistics consultant.
Andy Cliff, managing director of logistics and supply chain advisory firm Straightforward Consultancy, says that although large multinational import and export traders may have clarity on how they need to prepare for the end of this year, many logistics firms have still not presented their SME clients with a clear, simple and practical outline or checklist of what they need to do and when. He believes that needs to include key elements such as the information they will need from their client in order to make the customs declarations that will become needed, and the cost and administrative implications – plus who will pay them.
And although he acknowledges that some freight forwarding and logistics providers have tried to provide the necessary information to their clients, Cliff says it seldom looks deeply enough into the implications for SME importers and exporters, which in many cases lack in-house specialist logistics expertise. And he is also concerned that HMRC may be giving traders a false sense of security by reassuring them that they can avoid having to make full customs declarations on shipments from the EU to the UK until July, without fully explaining the processes that they will need to sign up to and the records that they will still need to keep in order to allow for that exemption.
Preparing for a worst-case scenario
Cliff also remains concerned that many importers and exporters, and in some cases their logistics representatives, are still hoping for some magical breakthrough within UK-EU trade negotiations that will provide easy clarity on what they need to do next. And he believes businesses must now start preparing for a worst-case scenario, with those preparations mostly required whatever the outcome of the UK-EU talks.
Even if a trade deal is agreed between the UK and the EU that involves zero tariffs, there will still be a large number of changes required that can be prepared for already – such as the need for customs declarations on GB/EU movements, he stresses. And in the absence of any complete guide that he has seen, his organisation has written its own guide for importers and exporters – ‘A straight-talking and practical guide to Brexit preparations’ – building upon a document it created last year to help prepare traders for a no-deal Brexit.
Although much has changed since then, many traders seem not much further forward than they were a year ago – partly because the Covid-19 pandemic has been so dominant in recent months, he notes. But with the transition period set to expire on 31 December, “we now have less than 100 days before we leave and negotiations for the elusive ‘deal’ are still up in the air”, Cliff observes. He urges traders not to use this lack of clarity “as an excuse for sitting on your hands or hoping for the best; there are things you can and must do to get yourself ready”.
He added: “The transition period should have given UK importers and exporters much-needed breathing space but in March, Covid-19 hit the UK hard and for many, it felt like Brexit was pushed way down the priority list.”
From his conversations with clients – for which his company acts as a virtual logistics manager – and from attending various webinars held this year by freight forwarders, he think it’s fair to say that because negotiations are still on-going, many of the 130,000 UK companies that currently trade solely with the EU – and aren’t familiar with Customs declarations and duties – along with many of their logistics representatives, “have been watching and waiting for the deal to be finalised”, with many also worrying.
The time for waiting is over
But Cliff says the time for waiting is now over, adding: “And regardless of what Michael Gove, David Frost, Ursula von der Leyen or Michel Barnier say or do, there are things that you, as a UK importer or exporter can and should do right now to take some control of your destiny, and put some key things in place to limit any impacts to your inbound supply chain or to your valued EU export customers – and time is short.
“The key thing to remember is, it doesn’t matter whether we get a ‘deal’ or not; we are leaving the Customs Union in just over 90 days, and so your exports to or imports from Europe will be affected, both in terms of costs and delivery times. In 2021, your imports or exports with the EU will be treated in a very similar way to shipments imported from the US or exported to China.”
He notes that as many companies aren’t even using Incoterms for their EU exports or imports in the current EU logistics environment, his consultancy has simplified its guidance to assist companies who export on a so called ‘delivered’ basis to their EU customers or on imports, paying for all freight costs from their suppliers’ factory.
“Of course, there are UK companies trading with the EU who don’t pay the transport costs or select the freight forwarder,” he notes. “For their exports, their EU customer pays all freight costs from their factory and on imports, their EU supplier organises and pays for the transport to their door.
“In these situations, our view is that the onus for preparation should be on your buyer or seller – who contracts the transport.” But he says they can still also extract useful information and guidance from his firms guide, “as all the elements are the same – and you should begin urgent dialogue with them if they haven’t been in contact already”.
Three key areas
Cliff says if companies export to or import from the EU, there are three main areas they need to focus upon to ensure they are ready for the new Customs environment from 1 January 2021. And these are the key areas addressed in the guide – both from the point of view of exporters and importers:
1. Are you as an exporter or importer, prepared?
2. Is your freight forwarder prepared and have they told you what they need from you?
3. Have you talked with or informed your suppliers or customers?
He notes: “It’s useful to think through all the steps in the logistics process from when a shipment booking is made by the exporter all the way through to delivery and to do the same for the commercial transaction (from quotation to final sale) as they’re interwoven.”
The document then separates into two sections in order to provide the most important information he believes is needed for imports and for exports, describing in some detail within each section key questions importers or exporters need to ask themselves and their suppliers.
Is your freight forwarder prepared?
On the question of whether a company’s freight forwarder is prepared, Cliff says many will assume that freight forwarders will have the necessary skills and will be making the right preparations for themselves and their clients. But he urges companies not to make any assumptions, noting: “Many freight forwarders who specialise in EU imports/exports have existed in a non-Customs environment since the incept of the single market in 1993. That’s 27 years, and so many of their current staff won’t even recall a time when Customs declarations were required.”
He highlights that UK-EU road freight movements are currently essentially the same as domestic freight movements, with the documentation in many cases involving little or nothing more than an invoice and the necessary despatch documents. And a significant number of the UK and European freight forwarders that manage those movements have only ever handled intra-EU movements.
“These freight forwarders are now having to upskill or employ staff to carry out these new processes – quite a challenge, and a risk for customers,” Cliff notes, highlighting estimates that the UK will need 50,000 new Customs brokers to cope with the number of new declarations.
Through his organisation’s role guiding importer and exporter clients through the world of logistics, he says he sees around five or six bulletins each day from logistics and freight forwarding providers to their customers, “so we’re very well informed on what the market is doing. We also have relationships with many logistics providers by way of the logistics models we’re managing on behalf of our customers. But even now, with only 3 months to go, we still see that many of the bulletins/guidance issued by EU forwarders to customers are really not clear or comprehensive enough or properly ‘joined-up’,” Cliff notes.
Robert Keen, director general of the British International Freight Association (BIFA), however does not accept that there is any significant lack of communication from freight forwarders to their customers. He suggests that any lack of clarity may be because “everyone is still in the dark on some aspects of how the border will work, because of lack of clarity from government”.
Keen noted: “As and when government provides information and clarity, BIFA is making information available to its members on its website, and through internal communications,” highlighting via various website links “that BIFA members – large and small – are providing such information”. He added: “BIFA only has anecdotal evidence of what members are doing to keep their customer base informed about Brexit preparations; but I do take issue with the assertion that many freight forwarding and logistics firms have still not presented to their clients a clear, simple and practical outline or checklist of what they need to do and when.”
Cliff stresses that he is not wishing to engage in forwarder-bashing, and says his company’s guide is “far broader than the forwarder element; it’s intended as a call to action for importers and exporters, to explain the ramifications in plain English and give them useful advice on the steps they can and should take now.”
He also acknowledges that “there are some forwarders who have put in a lot more thought, time and investment to try to plan ahead and guide or support their customers, for example posting videos or hosting trade webinars – for which I give them great credit in what is an incredibly fluid environment.
A logistics ‘translator’
“But for the average customer, who has no experience of Customs, Incoterms or duties and taxes, it’s just too confusing – it’s ‘logistics-speak’,” he notes. “And they really just want a logistics ‘translator’ to talk to them in their language and to answer these basic questions, which are: Will my export shipments be delayed? Will it cost me more? Will it cost my customers more and do I need to raise my prices? What do I need to do to lessen the impact on my business? Are there any new procedures that I or my customer will have to follow?”
Cliff continues: “Bearing all this in mind, you should urgently engage with your current forwarder so you’re confident that they: a) fully understand the BREXIT related changes and the impact on you and your customers; b) have everything covered operationally; c) have told you what they need from you – in particular, invoice layout and content; d) are confident that they will be able to provide you with a door to door service post 1-Jan and how that will differ from today in cost and delivery time; e) are able to provide Customs clearance facilities at destination.”
Conversations with customers
Cliff says the question of whether import and export companies have talked with their own customers about the implications of Britain’s exit from the EU rules from 1 January was surprisingly pertinent.
“From what we’ve learned over the last 12 months after dialogue with companies here in the North West, this seems to be a major blind spot; that could be because of the distractions related to Covid-19 or because many were waiting for direction and clarity from the government,” he notes. “But for the sake of your customers, most of whom we’re sure you’ll be keen to retain, you must begin this conversation, or risk the possibility of them sourcing from elsewhere, most likely within the Single Market,” he urged shippers.
He says import and export companies’ primary concerns should be: a) who is going to pay the Customs clearance fees, import duties and taxes? b) how will shipment delivery times be affected? c) will the selling price of your goods need to change? d) might you need to send additional product to them before the end of the transition period to prevent disruption to their business?
The nine-page guide for import and export companies goes on to describe in further detail the key issues that companies will need to urgently consider, including DAP Incoterms; the abandonment of the UK’s government’s Transitional Simplified Procedures (TSP), with
HMRC now recommending the use of EIDR (Entry In Declarants Records) process – and its relationship with the Customs Procedure and CFSP (Customs Freight Simplified Procedures) – as well as the return of Postponed VAT Accounting.
Logistics jargon in plain English
In his concluding comments about the guide, Cliff notes: “We have tried to translate the logistics jargon into as much plain English as we possibly can. This guide took several days to write and is designed to help the vast majority of UK customers exporting or importing non-restricted goods – and especially those companies who have never had to deal with ‘full-blown’ imports and exports outside the EU, and all the complications and burdens which this can bring.”
He tells import and export firms: “It may be that we haven’t captured everything here and some freight forwarders may disagree with our observations on the UK’s state of readiness; but please do use this straightforward guide to get the basics in place in your business – it may give you a competitive advantage! If you now feel you actually do need expert advice to walk you through all this, and maybe even someone to actually lead this process, we’d be happy to provide some help by way of our consultancy services.
“But whatever you decide to do, you really must act now.”
Updated Border Operating Model
And although the UK government yesterday published an updated Border Operating Model, which provides “further detail on how the GB-EU border will work and the actions that traders and hauliers need to take” in preparation for the end of the transition period, Cliff says there are still a large number of gaps in the information. For example, although it provides some good new detail on certain types of specialist import shipments, such as livestock and pharmaceuticals, it still does not provide enough detail on the ‘normal’ goods that make up probably 90% of import shipments.
Cliff commented: “Regarding the latest Border Operating Model just published yesterday, this is an update of the first version the government published in mid-July. To be honest, at 138 pages, many SME customers importing standard type goods will find it overwhelming and technical, so it will go over their heads – they’ll expect their freight forwarder to ‘sort it out’ for them.”