UPS healthcare & life sciences international logistics report - truly surprising statistics!

Living in the world of logistics, I receive industry bulletins every day and my company, Straightforward Consultancy manages the freight models for many customers so I feel pretty connected to the real world, and I have lot of industry experience gained by working for companies such as DHL and Kuehne & Nagel, but this article caught my eye, and shocked me.

Here is a report conducted on the medical and life sciences sector by UPS and the headline is as follows:-

"Only 50% of healthcare and life science companies feel they are successfully managing logistics, warehousing and transport costs"

We have experience in the life sciences sector and took on a client in Liverpool in 2012 who imported perishable laboratory product by air freight from Asia, mixture of -20C, 2-8C and ambient. Their issues were that they were concerned about their air freight costs and they couldn't rely on their (valuable) product arriving in a 4 day window (otherwise it perished and was unusable). They also had several logistics providers across their Asia supplier base which complicated matters.

We made a really positive impact on this customer by putting in place a solid service level agreement (SLA) which mapped out every step in a timeline from date of pick up covering every day of the week through to UK Customs clearance and delivery on dedicated vehicles. The outcomes were dramatic - we shortened the transit times to as little as 72 hours, reduced their air freight costs by 60% and put in place a failsafe, monitoring each shipment and the forwarder's performance closely. From that point they never had any product delivered outside the 4 day window.

I think, that like a lot of companies, they wanted to make changes but were fearful of making things even worse, which is understandable.

But when I read this report I think to myself, how can this be, how can 50% of companies in this sector have so little control over their logistics, warehousing and transport costs - and do they also have equally low confidence in the reliability of their international logistics model?

I just find it to be remarkable, but if this rings a bell in your organization, please seek some outside expertise, you will provide a better service to your customers and become more competitive on your landed costs - and you will achieve that wonderful feeling - peace of mind. If you're not sure where to start, then contact us, we'd be happy to help you.

http://theloadstar.co.uk/weak-links-healthcare-life-science-supply-chains-revealed-new-ups-research/?utm_source=The+Loadstar+daily+email&utm_campaign=eabb2f99e8-Loadstar_19_November11_19_2015&utm_medium=email&utm_term=0_c4570e43d4-eabb2f99e8-125883633

Please follow me on Twitter @AndyCliffSCL, visit our website www.straightforwardconsultancy.co.uk  and our blog http://straightforwardconsultancy.blogspot.co.uk/

Andy Cliff is an industry professional who launched his own logistics consultancy, Straightforward Consultancy Ltd (SCL) after a 30 year career in international logistics, working for companies such as DB Schenker, Kuehne & Nagel and DHL Global Forwarding in operational, sales and management roles. 

Andy felt that in an increasingly complex and confusing world of logistics, small-medium sized UK importers and exporters needed a company alongside them which could help them to reduce costs, lessen their workload and provide expert advice and support day-to-day. In 2015, SCL celebrated its 5th birthday after a record year in 2014. Andy also became part of the  judging panel for the 2015 Global Freight Awards, which recognize quality, innovation and performance in the field of international logistics. 

You're importing from the USA - but are you aware of this?

Are you one of the thousands of UK importers who aren’t aware of this? Are you in finance, logistics or one of the directors? If so, read on - this article is well worth a few minutes of your time. 

As an importer, whether you import by ocean freight from China, air freight from the USA or use DHL Express / UPS for your small parcel shipments from Japan, you should know that you have legal responsibilities to HMRC / HM Customs under the Customs & Excise Management Act 1979.

So why should you be concerned?  You actually leave all that work to your freight forwarder / logistics provider / Customs broker, they charge you for their services and you take delivery of the shipments. You certainly don’t make any Customs declarations to HMRC so surely, if anyone makes a mistake, it’s certainly not your responsibility – right?

Actually, no.

When you use a freight forwarder, logistics provider or Customs clearance agent or Customs broker to carry out the Customs clearance for you, 99 % of the time, they’re acting as your Direct Representative, even if they haven’t always formalised that arrangement with you. So what does that mean? It means that although they declare the goods to Customs for Customs Clearance purposes and sign the Customs Entry / C88 (albeit electronically), they’re doing it on your behalf and you're actually liable for any mistakes or incorrect declarations on that entry.

All this might come as a surprise to you but it’s most definitely in your interest, from a legal, risk, commercial and financial perspective to find out exactly how this process is being managed right now as it raises some fundamental questions as below:-

1 – How are all the different products we import being classified for Customs purposes and who actually classified them?

2 – What duty rates are we paying and are they correct?

3 – Are we paying too much duty, in which case money is being wasted?

4 – Are we paying too little duty, in which case we leave the company exposed to fines and time-consuming Customs investigations?

5 – Are the correct values being declared to Customs?

6 – Are we as the importer keeping full and accurate records as required?

7 – As the importer, can we demonstrate to Customs that we have a robust Customs Compliance process?

8 – If we had a Customs inspection, would we be able to prepare for it and would Customs find us to be compliant?

If you read these questions and then start to feel uncomfortable, then you’re probably not alone – in our experience, very few importers take Customs Compliance seriously, mainly because with so many companies these days, they don’t have a dedicated department for logistics or shipping and the responsibility for logistics falls across several departments, so no one manages this area at all - and that is a real concern.

 If they ever do get a visit from their local Customs officer, they often find it to be a very unpleasant experience, as Customs will expect them to have kept detailed records of their import consignments and they’ll also take great interest in the Customs commodity codes, duty rates and the Customs Procedure Codes being used by their Customs agent.

If they discover any errors, you can be assured that they will start digging and if there are any errors in your declarations, compliance processes or procedures, they will most likely find them. This process is very unpleasant and worrying for importers as Customs can be relentless in their search of lost revenues connected to underpaid Customs duty and VAT, can levy fines and insist that underpaid duties going back 6 years are repaid. This can not only cause a lot of disruption to your business, it can mean you are presented with a large bill (and possibly a fine).

As an example, a healthcare company in Warrington we visited were importing from Asia and had been using an incorrect commodity code for many years. HMRC visited, then did the analysis of all the affected Customs entries and presented them with a bill for £ 45,000 which they consulted us upon. Although we tried to help, we told them that unfortunately, HMRC were correct and we couldn’t find any Customs rulings in the UK or EC to justify their use of that commodity code.  They struggled to pay this huge figure and I think they wish they had taken their Customs responsibilities seriously years earlier. 

So how do you fix this? In our opinion, it’s all about doing some basic research, finding out how everything works today, ensuring any grey areas are dealt with and then putting in place robust procedures. After that, just as importantly, carrying out compliance checks each month to ensure that the commodity codes and Customs procedures are being followed (and correcting any errors quickly). This way, when Customs do visit, you can demonstrate a really solid process and even if they don’t, you have complete peace of mind that you are paying the right amount of duty and you’re able to respond with confidence should a Customs visit or inspection raise its head.

Some of the main things you should be checking if you decide to carry this out yourself are:- 

1 - Correct tariff classification (which affects the duty rate payable)

2 - Value declaration (is the value on suppliers invoice correct)

3 - Correct currency code

4 - Declaration of marine insurance (dutiable)

5- Declaration of correct freight charges (dutiable)

6 - Correct/appropriate Customs regime (home use/IPR/OPR)

7 - Application of any duty concession which may be applicable

 (There are over 54 fields on a Customs C88 but these are the main ones).

HMRC have issued guidance to remind customers of their responsibilities in this area which are “IT 03 – What International Trade Records Should I Keep” and “IT04 – Recommended Management Checks For Importers”
 however they're not well-publicised and the wording inside may be confusing to the average UK importer (who has most likely never completed a Customs entry in their life!).

We carry out Customs Compliance work for almost all of our import customers so they know they're compliant, they're paying the right amount of duty, the correct tariff codes are being applied for the different products they import and they're taking advantage of any Customs duty reliefs which are available. The other big benefit is the obvious one - peace of mind, it's being managed, and if they get a Customs visit, we can show they carry out a solid compliance process to ensure any errors are picked up and corrected.

This was how we uncovered a £ 26,000 duty overpayment for a Warrington customer in 2012 who import from the USA. The mistake involved over 127 Customs entries and took several months but we succeeded and they not only appreciated the large refund, they now also enjoy duty rates 25% lower on all their current shipments which helps them be more competitive, all with HMRCs blessing!. We’d already reviewed their import air freight and ocean freight in 2011 and made significant impacts on their landed cost and transit times and we continue to manage their international logistics to this day.

As you will see from our website, Customs compliance is just one of the core services we provide to customers alongside our Freight Reviews, Freight Management and Consultancy.

Please follow me on Twitter @AndyCliffSCL, visit our website www.straightforwardconsultancy.co.uk  and our blog http://straightforwardconsultancy.blogspot.co.uk/

Andy Cliff is an industry professional who launched his own logistics consultancy, Straightforward Consultancy Ltd (SCL) after a 30 year career in international logistics, working for companies such as DB Schenker, Kuehne & Nagel and DHL Global Forwarding in operational, sales and management roles. 

Andy felt that in an increasingly complex and confusing world of logistics, small-medium sized UK importers and exporters needed a company alongside them which could help them to reduce costs, lessen their workload and provide expert advice and support day-to-day. In 2015, SCL celebrated its 5th birthday after a record year in 2014. Andy also became part of the  judging panel for the 2015 Global Freight Awards, which recognise quality, innovation and performance in the field of international logistics.