How to make a wiser choice when changing your logistics provider or freight forwarder

We know that it must be quite a dilemma when you’re unhappy with your logistics provider for whatever reason, be that cost, service, communication, or just that you have that nagging concern that this really needs reviewing or changing.

These days however, many companies have pretty flat structures, don’t have the luxury of a full time logistics manager and so the person who procures logistics may have a wealth of other responsibilities - and certainly won’t have specialist knowledge of freight markets, industry regulations and Customs procedures etc.

So, you’ve decided that you need to make a change, and there have been a few logistics providers that have been in contact in the past whose cards you’ve kept and a few others you think might be worth contacting so you set up meetings with them to explore what they have to offer. This is often a good start as you can then select a number of them to quote on your air freight / ocean freight traffic.

The freight forwarder will then arrange an appointment with you so they can introduce themselves and tell you about their organisation, what makes it tick and what they can do for you. Thing is, most of the people you meet will have a sales remit and will tell you a similar story - they have really competitive rates, overseas offices in all the right places, their staff are well trained and customer-focused and their service is excellent (after all they are in sales).

So, you now have a list of maybe 5 or 6 companies, all of whom seem very keen, and all of whom seem qualified to handle your traffic.

You may not be looking forward to placing your traffic out to bid but you put something together and send it to the freight forwarders so you can assess their merits like for like and then make a balanced and prudent business decision.

But there’s a few things you can’t really know before you make your choice and appoint a new logistics provider and these are:-

“How will they actually perform once I have made my decision and awarded them the traffic?”

“Will their rates remain competitive once the quoted rates have expired?!

“Who will manage my account and if things go wrong, will anyone take prompt action without me having to chase them?”

“Will they declare my goods to Customs accurately?”

Of course this is a big decision and of course, a bad one can have significant implications on your supply chain and the company overall so you really need to be careful here.

In the spirit of due diligence, you may have even awarded what are known as “trial shipments” to see how a preferred company performs. The problem is this – the trial shipment is usually given huge focus by the logistics provider to ensure they create a great impression and then go on to win all your business, so it isn’t really a fair representation of the service you’ll get day-to-day once you transition from “new customer” to “existing customer”...

But hey, you’re just trying to risk assess and ensure you don’t make a big mistake, and who could blame you for that?

There is actually a very wise and important thing you can do. Speak with someone who already works (or has worked with) the forwarder you’re thinking of using and find out what they’re like to work with, not just in the honeymoon period (first 1-3 months) but long term. 

We’ve been trading since 2009 and have worked with many forwarders, and we’ve now distilled our core number of providers for our whole portfolio to around 7. In 2010/11, we tried some providers who seemed to tick all the right boxes and even convinced me but they turned out to be poor, and so of course we would never work with them again. 

So, if you’re in that position where you need to make a change but are concerned about making things worse, talk to someone neutral who is working with (or has worked with) those companies before. They may even tell you that you haven’t included a provider which would be an even better fit for your business based on your needs, their geographical footprint or their particular strength in a certain market. Or they may be able to negotiate far better rates and terms for your traffic than you could yourself - and manage it long term so you have peace of mind and can move on to bigger and better things with a feather in your cap for a project well done.

Please do contact me if you require any guidance or clarification.

 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, 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. Andy was part of the  judging panel for the 2015 Global Freight Awards, which recognize quality, innovation and performance in the field of international logistics. 

UK importers - take action - major Asia-Europe ocean freight rate increases from April 1st

Here at Straightforward Consultancy, we're managing the freight models for many customers, and the key markets for most UK importers are the US and Asia, but Asia is the one where the freight rates are most volatile, so you really need to manage this area carefully.

Since early 2012, we have seen huge swings in ocean freight full container (FCL) rates from Asia, all related to the supply/demand cycle and the fact that Asia-Europe is a very seasonal market.

Caught up in the middle of this are the UK importers, most of whom would much prefer a more stable freight rate so they can build these figures into their selling prices and know their margins are covered.

In the last few weeks we have seen rates falling as low as USD 100 per 20 foot however that places shipping lines in a loss making position so we're seeing them withdraw vessels to reduce capacity and return rates to sensible levels.

Most customers don't have the time or expertise to check whether their own ocean freight rates are competitive and we often find they're paying around 35% more than they need to so even though the market rates may slip back, the customer's rates don't follow the market.

On April 1st, the shipping lines are planning some significant increases in freight rates of up to USD 900 per TEU (20 foot container) or USD 1800 per 40 foot container.

If you'd like the peace of mind of knowing that your rates are always kept competitive and carefully monitored, please do give me a call and I'd be happy to explain how we can help you.

Kind Regards


Andy Cliff
Director

Straightforward Consultancy Ltd
4, Beckett Drive
Winwick Park
Warrington
Cheshire
WA2 8XJ

Tel : 07934 443492
Email : andy@straightforwardconsultancy.co.uk
Web : www.straightforwardconsultancy.co.uk
Blog : http://straightforwardconsultancy.blogspot.co.uk/
Twitter: @AndyCliffSCL
Linkedin: http://uk.linkedin.com/pub/andy-cliff/1a/43/72

Skype: andy.cliff1@skype.com

The Union Customs Code - a useful overview without industry jargon!

For those of you who import or export, the Union Customs Code takes effect on 1st May, less than 6 weeks from now and in the spirit of our motto, "logistics simplified" we decided to distill all of the information we'd gathered into a no- nonsense, practical and concise overview and write to all our customers so they were fully abreast of the changes...we also thought it may be useful to the wider supply chain community hence our post today.

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You may have heard about the changes taking place on 1st May 2016 with the arrival of the Union Customs Code. You may also have heard the term Authorized Economic Operator being used in the same conversation and naturally, you may then be wondering, what do these terms mean – and how will they affect our business?

As you can imagine, we have been monitoring the developments closely, have attended a dedicated UCC/AEO seminar and have since had written and verbal discussions with one of the leading Customs officers in the UCC team here in the UK.

It’s fair to say that Customs have not been very forthcoming with information on exactly how importers/exporters (referred to as traders by HMRC) will be affected and in fact, the officer we communicated with advised us that they are still to release more detailed guidance on 31st March 2016 (only 1 month prior to the launch date of the UCC!). To be fair to HMRC, the finer points of the UCC were only ratified in late 2015 which prevented them releasing more details.

Firstly, I should explain in more detail what both of the above terms mean.

Union Customs Code

Since the 1990s, within the EU, we have operated under the Community Customs Code, however after almost 10 years of discussion and a failure to agree on the Modernised Customs Code (MCC), the UCC was ratified in 2013 and will bring about the following changes from 1st May 2016:- 

• More streamlined Customs legislation and procedures
• Greater legal certainty and uniformity to businesses
• Increased clarity for customs officials throughout the EU
• Simplification of Customs rules and procedures to facilitate more efficient customs transactions in line with modern-day needs
• Complete the move by Customs to a paperless and fully electronic environment
• Reinforce swifter customs procedures for compliant and trustworthy economic operators (Authorised Economic Operators)

Authorized Economic Operator

AEO is an internationally recognised quality mark which was introduced by the European Commission in 2008 and indicates that a business operates within a secure supply chain and that their internal controls and procedures are efficient and compliant. The Union Customs Code, as you can imagine, is a pretty detailed piece of legislation, and some would say (quite justifiably) that it is quite daunting and confusing, however what most customers really want to know is, should I be concerned about it, and do I need to do anything? Each customer’s situation is different of course but I will try to summarise the situation for the majority of importers below.

Importers

If you are a typical UK importer and you import the goods into Free Circulation – that is, you pay the import duty & VAT when the goods are cleared and either retain the goods within the UK, or you sell them on to UK or EU customers, then you are unlikely to be affected by the UCC unless you operate your own Customs deferment account, where you defer any duties payable at the time of clearance and reimburse Customs once per month.

If you do, the UCC introduces the concept of financial guarantees for most actual and potential Customs debts in the form of the new Customs Comprehensive Guarantee (CCG)- however, as long as you do not make any changes to your deferment account (for example, making changes to the deferment account limit or the bank which guarantees the deferment account, the deferment account won’t be reassessed under the new terms and so you should not be affected.

If you operate any other Customs procedures such as Inward Processing, End Use, Outward Processing, Customs Warehousing, Temporary Admissions or claim 0% Preferential Import Duty, then the new Customs Comprehensive Guarantees will be required.

Let me just put something into context here, as many customers will be feeling a lot of pressure to now become an AEO. With AEO, there are 3 levels of certification, AEOC, AEOS and AEOF however there are presently only 399 AEOs in the UK, as the take up over the past few years has been very poor. Given that almost 50% of these are freight forwarders and there are 220,000 registered UK importers it is clear that the benefits of AEO have not been seen as worthwhile when compared to the time and effort involved in applying and maintaining AEO status. HMRC are also unlikely to be able to even process applications should large numbers of importers/exporters feel they must act however they have seen a rise in applications in the last 3 months.

Exporters

You will notice that I haven’t covered exporters in this summary and this is because, generally speaking, there is much less interest by HMRC generally in exports (as there’s less revenue/duty/VAT attached to exports, and in turn a lesser need for CCGs) and therefore the UCC is likely to have a limited impact on exports. Should you be a user of Inward Processing, then by default, you would be affected as an importer as you would process goods and then re-export and be covered as an importer in this article.

 So to summarise, for the majority of importers.

1. Importing goods to Home Use and do not have their own deferment account

Unless HMRC interfere with clearances for non-AEO companies (which is highly unlikely given that 99.9% of UK importers/exporters are non AEO status), they should see no change to the way their imports are processed however if they use Straightforward Consultancy (SCL) services for Customs compliance, this will be a great asset should they decide to opt for AEO status, as HMRC will want to see evidence of a proper process of Customs compliance, preferably for 3 years

2. Importing goods to Home Use and have their own deferment account

Again, unless HMRC interfere with clearances for non-AEO companies, they should see no change to the way their imports are processed however if they make any changes to their deferment guarantee, they will need to set up a Customs Comprehensive Guarantee (CCG). If they use Straightforward Consultancy (SCL) services for Customs compliance, this will be a great asset should they decide to opt for AEO status, as HMRC will want to see evidence of a proper process of Customs compliance, preferably for 3 years. Customs are also saying that if a customer becomes an AEO, they will benefit from a 70% reduction in the guarantee amount.

nb - If you operate SIVA (Simplified Import VAT Accounting), where you use this system to reduce the amount of the guarantee you have lodged with HMRC (just to cover the duty) then you can continue to use SIVA in its current guise until your term expires.

3. Importing goods to other Customs regimes, such as Inward Processing, End Use, Outward Processing, Customs Warehousing, Temporary Admissions or claim 0% Preferential Import Duty 

The arrival of the UCC will definitely affect you, as the new Customs Comprehensive Guarantees will be required and for example, if you already have an IP Undertaking which is due to expire after 1st May 2016, then this will be valid until expiry unless you make any changes to it.

 I hope that this has been useful and gives you a pretty concise overview on what is happening with the Union Customs Code, and more importantly, how it may affect you. Of course, this is a concise summary and reflects our personal opinion of the changes and far more detail sits within the Customs notices and, we hope, within the update on 31st March. I also attach a link to the last official update from HMRC in October 2015.

https://www.gov.uk/guidance/introduction-of-the-union-customs-code-ucc

Please do contact me if you require any guidance or clarification.

 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. Andy was part of the  judging panel for the 2015 Global Freight Awards, which recognize quality, innovation and performance in the field of international logistics. 

Did you notice what happened on February 29th?

Did you notice? On 29th Feb, sterling fell to a one year low against the USD and dropped below the critical 1.40 level - bad news if you're importing from overseas where your product costs are often agreed in USD and, you may not realise, your freight costs are probably in USD - that's a 10% cost hike in 3 months. Time to take a look at your logistics costs and try and claw back some lost margin! But if you do review it, do it professionally and ensure the reliability of your supply chain is not placed at risk.

Article on USD strength

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. Andy was part of the  judging panel for the 2015 Global Freight Awards, which recognize quality, innovation and performance in the field of international logistics.