Good morning All
I thought I'd just share this thought with you.
As you know, we have been trading since late 2009 so we're in our 4th year.
One thing which has benefited our business is that most small-medium sized customers with international supply chains generally have very flat organisational structures, and any investment they're making as we come out of recession is focused on new product development or sales and marketing efforts - and who could blame them?
The problem is that the people who are tasked with selection of freight/logistics providers are often generalists - often a purchasing manager might be responsible for imports and an export sales manager might look after exports. Even if they do have some knowledge, the freight market is pretty fluid, complex and littered with jargon (and regulations, eg Customs) so it's left well alone!
So, it's often the case that :-
1) They are not sure if they could find a better / more competitively priced provider
2) They are short on time and wary/unsure about conducting a review process (or who they would invite to quote if they did)
3) They remain very loyal provided the service is ok (ok can mean mediocre)
4) They are likely to accept modest price increases with some back up evidence from the forwarder
5) They do not realise their responsibilities as importers and this is so important, see below
With 5) 99% of UK importers use a freight forwarder to complete import Customs entries (C88) on their behalf and pay them for the service. The freight forwarder acts as an Direct Representative which means they are acting on your behalf and you are liable for the duties/VAT. It also means that the importer is responsible for any mistakes or classification errors (eg using the incorrect tariff code/duty rate etc or declaring the value incorrectly). We have been asked to help UK importers (and exporters) where errors have been made by the forwarder and Customs have levied fines even though the client believed the freight forwarder/agent was responsible because they had signed the Customs entry (C88).
In every case, we have sorted the problems out, but more importantly, put in place better processes to manage and monitor the accuracy of the declarations made by freight forwarders. In one fairly recent case, HMRC came back one year later almost to the day to check that lessons had been learned. They spent 7 hours at this particular client and awarded us a 100% clean report. So everyone was happy and the client just knows that this area is "covered". Directors of business like to know that sort of thing when they have their helicopter view.
As a result, we now offer Customs expertise and Customs Compliance services as part of our service offering, and most customers do take this up.
I went to a large company yesterday for the first time and it became clear that they had no idea about tariff classifications or Customs compliance. They were also concerned about freight costs, not having a real fix on what they were or whether they were with the right provider and so we're going down next month to do a scoping exercise for them and to put together a package to do a full Logistics Review (using our shared savings model) as well as a health check on the Customs side.
Talking about Customs, it could even be that customers are paying too much Customs duty which we noticed last year for a Warrington customer, we secured a £ 26,000 duty repayment for them covering 127 Customs entries and they're now far more competitive on landed cost per unit.
We also visited a company in Warrington two months ago and they had been using the wrong commodity code / duty rate for 5-6 years and HMRC had investigated them. The result was pretty awful - Customs wanted the underpaid duty back - £ 45,000, and the director told me that could sink their business.
So time to check you have a good compliant process in place, better that you spot the errors before Customs do....
Until the next time.
Andy
http://www.straightforwardconsultancy.co.uk/
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