Brexit and logistics: how to minimize the disruption
We’re less than 6 months away from the official Brexit date (29 March 2019), and yet nobody knows for sure what the outcome will be. Therefore most discussions revolve around endless arguments about what scenario might apply, anywhere from the softest to the hardest Brexit imaginable. Such discussions leave people and companies confused and powerless.
Being prepared no matter the scenario
Consequently, most companies have adopted a ‘wait-and-see’ strategy, which effectively means doing nothing and hoping for the best, leaving the onus on politicians to somehow resolve the issue. However, this is a serious matter that has the potential to impact the wealth of hundreds of companies and their many thousands of employees, and families in the UK and Europe, so it should be handled responsibly. No one has a crystal ball to tell the future but any responsible company can take practical measures today to prepare themselves for Brexit, no matter the scenario, soft or hard.
What solutions to implement
What can be done? Companies trading with the UK can already take simple steps to be as ready as possible and to minimize the disruption from Britain exiting the European common market. How is business currently done between the EU and the UK? Trading in free-trade Europe has become very easy, almost too easy, and many bad habits have been developed as basic trade documents and mentions have become non-essential within the common market. Things like a proper and compliant CMR, commercial invoice, HS code, origin or incoterms…
Given that Britain might become as much of a foreign country as the USA or Switzerland, it would make sense to treat every shipment as an international import or export procedure. In this case, the next steps are quite obvious for anyone familiar with international logistics. First, it is essential to go through the documentation of every UK shipment with a fine tooth comb:
Invoices – do they indicate shipper and consignee details including VAT / EORI numbers, commercial value and currency?
CMR – does it carry details of the goods, exact quantities, packaging, country of origin and destination? Commodities – does the paperwork specify the goods classification as per TARIC nomenclature, are the HS codes indicated?
Classification is essential and, if implemented upstream, will give you a head start for proceeding with customs authorities and allow you to adapt much quicker to new legislation and tariffs, should any customs and duties become payable after Brexit. Furthermore, this early preparation can lead to future savings in the form of any tax relief that may be negotiated between the EU and the UK for critical industries such as automotive, aerospace or pharmaceutical. Suppliers and customers will no doubt be interested in partial or full tax exemption. To benefit from these exemptions, however, imported / exported commodities will need to be properly classified and identified in the customs nomenclature – see EU classification.
Incoterms will become a primary concern the minute taxes and duties start to apply. Pre-empting contractual terms between suppliers and clients will avoid costly surprises later on. It will become more crucial than ever to think twice about what you sign and what you may have to pay in case of future tax increases.
The need to involve suppliers
Preparation should not be restricted to the company walls. Strategic suppliers and customers should be involved as early as possible to ensure they adopt the same essential procedures, as trade is a two-way process. It is not unreasonable to imagine that contractual clauses, compulsory deadlines and even penalties might be imposed on strategic suppliers who haven’t taken steps to prepare themselves. Anticipation therefore could turn out to be vital to secure the supply chain and avoid major bottlenecks with customs post Brexit.
Another idea would be to create a special Brexit project team within the company, with enough authority and skills to quickly adapt internal processes in line with any changes. Last but not least, businesses dealing with the UK should approach and sign service contracts with AEO brokers on both sides of the Channel in order to avail their expertise and assistance the day Brexit becomes a reality. Such skilled advisors will be hard to come by after Brexit, with hundreds of companies rushing to find a solution.