Customs, borders and logistics – how to plan for Brexit on 29 March 2019

While the UK logistics industry has declared that it’s ready to work closely with the government to try to ensure Post-Brexit structures don’t ‘stifle supply chain efficiency’. The recently published Customs Bill Paper gave an outline framing for the UK’s customs, VAT and excise arrangements after 29 March 2019.

UK Customs after 2019

The framework includes the creation of more inland customs depots to try and create more freedom for port-based customs. What isn’t clear is where these inland depots might be based, how they might be staffed and what effect this might have on the warehousing and logistics sector.

While there are clearly opportunities for logistics UK organisations to benefit from this expansion of customs facilities, there is also a concern that it may lead to log-jams and backwaters of customs clearance and maybe even tiers of customs access that could disenfranchise smaller organisations, especially specialist importers and exporters.

Industrial Strategy for post-Brexit Britain

The 250-page document published by the government this month reveals that supply chain concerns are at the heart of the government’s plan. Business Secretary Greg Clark said, “For all the excellence of our world-beating companies, the high calibre of our workforce and the prosperity of many areas, we have businesses, people and places whose level of productivity is well below what can be achieved.” And while there are four ‘grand challenges’ in the paper, it is the first one – ‘becoming a world leader in the way people, goods and services move’, that will impact the supply, warehousing and logistics industry. The second and fourth ‘grand challenges’ also clearly impact warehousing and logistics:

  • Putting the UK at the forefront of the artificial intelligence and data revolution.
  • Maximising the advantages for UK industry from the global shift to clean growth.

Becoming a world leader in logistics

The paper plans a supply chain competitiveness programme to give key businesses the chance to improve. The Confederation of British Industry urged the government to progress swiftly in helping organisations to strengthen supply chains. This aim at world leadership ties in with one of the Institute of Grocery Distribution’s top five trends that will influence the global grocery market over the next 12 months: “becoming hyperlocal” – which is a significant factor in the Brexit debate. The IGD says that while shoppers are ‘globally minded’ these days, they are developing a stronger desire to have strong links to local regions and purchasing options for local products. This will affect logistics and warehousing in three ways:

  1. Produce will be available for much shorter periods of time
  2. Seasonality will create uniqueness
  3. Increased customer desire will develop to obtain the products.

The effect of these trends and plans is likely to have a substantial impact on the domestic logistics industry, creating a demand for more local warehousing and 3PL logistics to distribute hyperlocal products and this, combined with a drive towards supply chain strengthening may mean that a beleaguered transport and distribution sector sees some opportunity for growth.

Oxera report warns about border checks

Oxera, a Europe-wide consultancy, has created a report that suggests a dire future for Britain, including ‘vast lorry parks’ across the south-east of the country and huge border delays. The knock-on effect could mean more than a billion pounds a year lost in the cross-border trade. It’s a starkly different focus to the government’s rosier challenge to warehousing and logistics, and Oxera’s three key concerns are slow trade, low regulation, and high enforcement costs.

New IT – a help or hindrance to Post Brexit logistics?

Another substantial factor that will affect logistics and warehousing after 29 March 2019, is the installation of a new customs IT system that was commissioned to provide 60 million customs clearances a year but will now be required to handle up to 300 million a year, at a time when there is no clear information about how the customs processes between the UK and EU will operate. While some MPs are confident that “the border is a tax point – not a search point – and …customs clearance can be managed incredibly quickly. In Singapore, clearance takes less than a minute.” Senior managers in the logistics industry point out that there are acute problems to address – for example, Dover handles 2.6 million freight units a year, and without new lorry parks to reduce congestion, and substantial investment in accessible warehousing, bottlenecks are bound to occur.

Becoming Brexit-prepared

There are several ways to ensure your business is Brexit ready:

  • First and foremost, it’s time to review supply chains: have a clear picture of how goods are moved to customers and examine how Brexit may affect the duty-free movement of goods. Ensure you know the economic origin of your goods, including raw materials, as trade terms may change if those countries have trade agreements with the EU. Talk to your finance team to be sure you have payment systems in place if you are required to pay duties post Brexit.
  • Scrutinise your current contracts and ensure that you have agreements based on the most recent Incoterms to limit risks and reduce transit charges. It’s a bad business habit – but a very common one – to carry forward the language from a previous contract, but this can impact your ability to recover costs if goods are lost or damaged and your terms are out of date.
  • Examine your internal processes and audits. There are many customs authorisations that simplify import and export and working through the application processes well ahead of Brexit can help organisations have a better understanding of the administrative changes that Brexit will bring. Also, streamlining the application process will always mean that the renewal of an authorisation will be faster than the initial application. Getting systems in place before the Brexit date may be crucial to ensuring your goods aren’t caught up in an administrative bottleneck.

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