UK importers and exporters - are you ready for a no-deal/hard BREXIT? Are you sure?

Hard/No-Deal BREXIT Checklist – Straightforward Consultancy - October 2019

In our view, if you export to or import from the EU, there are 3 main areas you need to focus upon to ensure you’re ready for a “no-deal” BREXIT scenario. We have written this guidance around companies who sell on delivered terms to their EU customers and ex works terms from their suppliers, as these customers have the most work to do. For customers selling ex works or buying on delivered terms, in our view, the onus for preparation should emanate from your buyer or seller who contracts the transport, but you can still extract useful guidance from the below as all the elements are the same.

1.      Are you as an exporter or importer, prepared?

2.      Is your forwarder prepared and have they told you what they need from you?

3.      Have you liaised with or informed your suppliers or customers?

It’s useful to think through all the steps in the logistics process from when a booking is made at origin all the way to delivery and to do the same for the commercial transaction (from quotation to final sale).

We’ll start with EXPORTS.

1.      Are you as an exporter, prepared?

Incoterms 2010 will come into sharp focus in a hard-BREXIT scenario, particularly for exporters, where many have traditionally shipped to their EU customers on a “delivered price” basis, often neglecting to quote Incoterms on their sales quotations or export/despatch invoices. In the past, this didn’t matter so much for the forwarders or end customers as EU road freight is usually fully paid by either shipper or consignee (unlike air or ocean) and no Customs clearance was required.

Your invoices will have to include a lot more detail so that a Customs declaration can be made, both on export from the UK (as happens now with non-EU exports) and a formal Customs entry on the EU side, whether that is in your customer’s name (Incoterms DAP), or possibly in your name (DDP) although DDP will be very complicated due to the requirement to register as an entity in the destination country and allow Customs declarations to be made in your company’s name. These arrangements will also have to be set up after 1^st November, as your current EORI number won’t be valid in the EU after 31-Oct.

2.      Is your forwarder ready?

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 26 years, and so many of their staff won’t even recall a time when Customs declarations were required, and in those times we were in the EEC, and most goods of EU/UK origin would have had duty-free status provided that a “T form” was raised so Customs entries were pretty simple. I remember, because I trained as a Customs broker and did them for 10 years. These companies are now having to upskill or employ staff to carry out these new processes, quite a challenge – and a risk for customers.

Against that backdrop, we have seen that a good deal of the bulletins/guidance issued by EU forwarders to customers vary considerably in content and/or detail and they can sometimes demonstrate a lack of understanding of the whole process from order to delivery which will then be similar to a shipment from say, UK to the US. Bearing that in mind, you should urgently engage with your 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 operationally (in particular, invoice layout and content)

d)     will be able to provide a (door to door) service post 31-Oct and how that will differ from today

e)     are able to provide Customs clearance facilities at destination

3.      Have you liaised with your customers?

Based on recent discussions we have had with customers here in the North West, this seems to be an area that few customers or forwarders have covered. So now it’s vital that you engage with your customers in Europe to firstly discuss the terms of sale for future deliveries, as until now, these shipments were almost as simple as UK domestic deliveries, with a delivered price offered to the customer. So, it’s vital that UK exporters should specify Incoterms clearly all the way through the quotation/sales/export process so it doesn’t cause problems for your valued customers.                                                                              

And if your customers buy from you regularly, have you talked with them to explain that they may now be buying on DAP terms, where they will be responsible for Customs clearance fees, import duties and local taxes/VAT? You certainly should do, and this leads us onto the role of the forwarder, who is a key stakeholder in this process. Post 31-Oct, they will most likely (for simplicity) clear the shipment and outlay the duties/VAT for your customer, so have they talked to you about the need for your customer to bear the duties/VAT and has any account or payment terms been set up in advance? If not, like many UK forwarders on imports, they may hold onto the shipment until payment for duty/VAT has been made, adding extra days onto the delivery time, and irritating or disappointing your valued customer.

Here is our guidance regarding IMPORTS.

1.      Are you as an importer, prepared?

a)     Again, Incoterms will become extremely important, so that both the

buyer, seller and the forwarder are clear on who will take responsibility for any extra costs which will now exist in a hard-BREXIT / no-deal environment. UK importers from the EU will generally be buying on either “delivered” terms, where the supplier organises transport to their door - or “ex-works”, where the UK importer organises the transport, selects the freight forwarder and pays all costs from the supplier’s factory to delivery here in the UK. However, Incoterms may not always have been made clear in the commercial relationship with your supplier but now it is important to be clear, as the Incoterms will determine what plans or changes you need to make.

b)     As with exports, the supplier’s invoice will need to show a lot more detail so that a Customs declaration can be made, both to facilitate export from the EU and to

assist with Customs clearance upon arrival in the UK. In time, we believe that European forwarders will set up standard procedures per customer, as non-EU forwarders have done for many years, saving everyone time and giving the front-line clearance staff the information they need to declare your shipments accurately and swiftly. But in the short term, it would be wise to ask your supplier to provide full supplier and consignee details and commodity codes, EORI numbers etc and your TSP registration number if you have one.

c)      What makes things slightly different for UK importers is that Transitional Simplified Procedures were introduced in February, effectively meaning that your shipment can flow through without a formal Customs declaration, with the responsibility for a declaration being placed directly with the importer and initially allowing them a month, and now until May 2020 to make these declarations. If you haven’t obtained an EORI number or applied for TSP, you really should, very straightforward, excuse the pun!

                             

                                         

2.       Is your forwarder ready?

As with exports, 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 26 years, and so many of their staff won’t even recall a time when Customs declarations were required, and in those times we were in the EEC, and most goods of EU/UK origin would have had duty-free status provided that a “T form” was raised so Customs entries were pretty simple. I remember, because I trained as a Customs broker and did them for 10 years. These companies are now having to upskill or employ staff to carry out these new processes, quite a challenge – and a risk for you, the customer.

Against that backdrop, we have seen that a good deal of the bulletins/guidance issued by EU forwarders to customers vary considerably in content and/or detail and can sometimes demonstrate a lack of understanding of the whole process from order to delivery which will then be similar to a shipment from say, US to the UK. Bearing that in mind, you should urgently engage with your forwarder so you’re confident that they:-

a)     fully understand the BREXIT related changes and the impact on you and your suppliers

b)     have everything covered operationally

c)      have told you what they need from you and your suppliers operationally (in particular, invoice layout and content)

d)     will be able to provide a (door to door) service post 31-Oct and how that will differ from today

e)     are able to provide Customs clearance facilities here in the UK and can ensure their trailers do not get stuck at ports such as Dover e.g. removal of entire vehicle to bonded facility

f)       will be prepared to handle your shipments if you have TSP authorisation, and can offer services for later supplementary Customs declarations

3.      Have you liaised with your suppliers or have they been in contact with you?

As with our guidance on exports, based on recent discussions we have had with customers here in the North West, this seems to be another area where there is confusion. So, it’s vital that you urgently engage with your suppliers in Europe to firstly clarify the terms of sale for future deliveries, as again, these shipments were almost as simple as UK domestic deliveries, with a delivered price offered to the you, the customer. So, it’s vital that UK importers should define and agree clear Incoterms with their EU suppliers so it doesn’t cause delays for you once the shipments leave your suppliers.

So, I hope you find this guidance useful, it really is designed to help you as a customer, especially those who have never had to deal with non-EU trade and all the complications that this can bring. There’s no doubt that many forwarders have engaged with customers but it can sometimes be very confusing as logistics people speak a different language and most customers don’t have an interpreter (apart from our customers of course!).

Kind Regards

Andy Cliff
Managing Director

 Straightforward Consultancy Ltd
Email: andy@straightforwardconsultancy.co.uk
Web: www.straightforwardconsultancy.co.uk
Tel: 07934 443492

                                                                                   

Nothing ventured....

On 4th September 2019, it was 10 years to the day since I formed Straightforward Consultancy Ltd (we abbreviate it to SCL) so does it seem like 10 years? Hard to say. I remember the first 3 years were really tough, but as they say, if it was easy, everyone would do it. I actually say to people that it wasn’t a brave and bold move on my part, and having been in continuous employment since 1978, the abrupt end to my career at DHL was certainly not part of the plan, nor was setting up my own business. It certainly was a big shock to my system, being conditioned, as all of my colleagues were, to playing their part in keeping a large company on track, the usual corporate stuff.

The natural reaction when it comes to an end, is to seek new employment in a similar role, and keep the money coming in to pay the bills, just as anyone would, but that didn’t work for me. It was a recession, and companies were cutting back and laying people off, so a bit like the famous business book “Who Moved My Cheese”, the cheese store had gone for good and it was time to go and find a new one.

The funny thing was that I was still looking for work after I formed SCL, almost like a reserve parachute, but I was faced with the ultimate dilemma in February 2010. A week or so before I actually launched the company, I was offered a highly paid job at a large logistics provider, with an office only 3 miles from home, and people said, why don’t you take it and work on SCL on the side?

Having thought about it long and hard, I knew that wouldn’t work, as I’d commit myself fully to this company just as I did for DHL and Kuehne & Nagel beforehand, and the SCL business/idea would wither on the vine. So, I disregarded the advice of friends and family knowing that this would probably be my only chance to launch my own business, and on 8th March, when everything was in place, I bit the bullet, hit the phones, and started calling potential clients, making 800 phone calls in that month alone, speaking to and meeting people until we won our first client in April.

It’s fair to say that it has been tough, but when my wife Diane joined the company in 2012, that helped to spread the load, although I was always the driver, as I had the industry knowledge, and it really meant so much to me that SCL was successful, and it has been. I was also very conscious of earlier stories I’d heard of people who’d left to set up their own business, only to struggle and then give up and that was a major motivator.

When you’re a small business, there’s so much to do, be that the core operational work for customers, or all the other stuff, such as sales, promotion and networking, invoicing, VAT returns - it goes on and on, and it often runs into weekends and evenings. But if you are really passionate about your business, and you can see that customers truly value what you do, it spurs you on, and that’s how 10 years can come around so quickly.

We’ve never had ambitions for meteoric growth, so some might say that it’s been a missed opportunity, but we wanted to remain on the front-line logistics-wise, in the trenches with our customers, which can have its frustrations, but it’s our passion. We also didn't want to dilute what we had and provide outstanding service. So, despite our modest ambitions, we’ve seen continued growth, fantastic customer loyalty and glowing testimonials and I don’t think anyone can truly understand the sense of achievement and satisfaction you feel by creating a business from scratch and seeing it grow and succeed.

I must of course thank all of our customers for their tremendous support and loyalty over the last 10 years and of course Diane, but I also want to thank all of the other people I’ve met or worked with on the journey, as all of these encounters can really help to guide, inform and motivate you, even if they might not seem to be beneficial at the time. So, be open to everything, learn from people, be professional and go the extra mile, it will be noticed.

So, would you believe it, 10 years, and still growing!

http://www.straightforwardconsultancy.co.uk/index.php

Finally, a ray of hope from HMRC for EU importers post-BREXIT

For months, many of us in the logistics world have been watching the twists and turns of Westminster politics, and becoming increasingly concerned about potential chaos at ports like Dover who handle the lion's share of shipments being transported from the EU, over 7000 vehicles per day (see below). Many of us have probably been shouting at the TV over BREXIT, because we really don't think the government or politicians have a clue about how things work (and therefore aren't best qualified to talk about solutions to things like a post-No Deal scenario).

https://www.doverport.co.uk/about/performance/

I went to a very well-attended BREXIT presentation at a major forwarder in November who gave the audience the low down - queues around Dover could reach 80 miles - yes 80 miles, so that's clearly a catastrophe as it wouldn't just delay deliveries of incoming shipments, it'd block the regional road infrastructure in the process, no wonder the troops are on standby. Yes, we saw the 88 trucks doing the exercise around Ramsgate for the Transport Minister, Chris Grayling recently but for most of us in logistics, it seemed like window dressing to show the UK was ready for "no deal", and it wasn't at all convincing.

https://www.bbc.co.uk/news/uk-england-kent-46775722

Of course, we're in the single market for another 50 days and today, it's a slick operation and the key thing is that the most trucks flow through cursory checks at Dover in 2 minutes, so that's great. And if you're an importer, you'll take delivery of your shipment from Europe a couple of days after that, so everyone's happy.

One thing the media and government seem to have failed to realize is that many of the incoming vehicles are operated by so called "groupage operators", which means that a truck may contain 40-60 shipments for various UK customers and in a no-deal scenario, that would mean that each and every shipment would need to be Customs cleared as each shipment would be treated just like a shipment from the USA or China and so import duty and VAT would need to be paid.

Interestingly, we have customers ourselves who import from the EU, where the goods have been held by their Asian supplier in a Customs bonded warehouse in the Netherlands. These goods have what's known as T1 status (they're not in Free Circulation within the EU) and so a Customs entry is completed for that shipment and duty and VAT is paid in the country of destination, but it delays the shipment by a day or so.

Now imagine what would happen if every shipment had to be cleared....if just 25% of the 7000 vehicles are groupage trailers, then we're talking almost 93,000 Customs entries per day, and because we've been in the Single Market since 1993, there aren't enough qualified Customs brokers at road freight operators or Customs officers to cope with this workload.

Clearly, HMRC knew it was going to be a potential car crash on 30-Mar. And so, finally, a ray of hope appeared yesterday in the form of a pretty low-key announcement from HMRC (who would of course be concerned about the thousands of new Customs declarations required should we leave the EU on 29-Mar in a No-Deal scenario) although they claim to have written to all of 145,000 companies who import from the EU.

Here's the thing, HMRC have recognised that a No Deal scenario would cause chaos and so they have announced a new regime called "Transitional Simplified Procedures" and what it basically does, is take away the need for clearances at ports like Dover so shipments can continue to flow freely, and they'll place the onus on importers to pay any duties and VAT the month after arrival. They'll need to set up a direct debit to do this, sounds like a simpler version of a Customs deferment account to me. How it'll work operationally isn't clear because of course, the freight forwarders will need to know who is and who isn't approved for the Transitional Simplified Procedures when one of their trucks arrives at Dover but this will hopefully be worked out in the next 50 days...talk about last minute!

So here's what I recommend that you do.     

1.     

Step 1

Check first that you have an EORI number (Economic Operator Registration & Identification). If you're an established small-mid sized business, you will have a VAT number, and the EORI is just an extension of that. So your VAT number may be 123456789 but your EORI number would be GB123456789000. To confirm if you have an EORI, enter the longer sequence into the EU database as one string using the below link and it will tell you if that EORI is valid. You will see that I have entered an erroneous VAT number GB123456789000 and the result shows invalid. If it's valid, then you can apply for the Transitional Simplified Procedures, go to step 2. If not, you need to apply for an EORI number, and this will be worthwhile even if you don't apply for TSP as I am seeing several road freight operators asking clients for this info in the last month so get ahead of the curve. In section 3 below, I will provide instructions below on how to get an EORI number.

http://ec.europa.eu/taxation_customs/dds2/eos/eori_validation.jsp?Lang=en&EoriNumb=GB123456789000&Expand=true

 Step 2 

Apply for Transitional Simplified Procedures. This is a new regime, fresh out of the box and the website only opens tomorrow, Thursday 7th February so I can't tell you much more than to check this link from Thursday onwards and get your application in.

https://www.gov.uk/government/news/hm-revenue-and-customs-simplifies-importing-from-the-eu-as-part-of-no-deal-preparation

Step 3

1.      So you don't have an EORI number? Don't panic, but don't hang around as many companies will start realizing the implications in a week or two as the fear factor ramps up. Here's the link to apply for an EORI number.

https://www.gov.uk/eori

We're keeping a very close eye on BREXIT developments as you can imagine so I'm sure there'll be more we can share over the next few weeks, and hopefully we won't go over a Cliff edge pardon the pun!
One last thing, we are carrying out this process for all of our existing customers, even though we don't focus on EU road traffic and tend to be far more involved in air and ocean traffic to/from Asia or North America - it's best to be prepared I always think, especially right now.If you need any more guidance or support, just drop me a line, I'll try to help.


Kind Regards



Andy Cliff