Before or after Brexit: why supply chain success depends on global trade and customs procedures
Jun 18, 2017 Comments (0)
The smooth flow of goods across borders requires compliance with global trade regulations.
Non-compliance can lead to serious financial penalties alongside potential criminal sentences, loss of customs privileges, border delays, service level impacts, and reputational damages – all of which can seriously threaten the future of a business.
Successful global trade compliance programmes drive business benefits in many areas. They accelerate and secure processes, and they have increasingly become a competitive factor as well. For large companies, effective programmes often even form a precondition for onboarding new suppliers.
A large part of UK trade is based on EU traffic – goods traded in “free circulation” between EU member states. With Brexit, this is set to change. Without full access to the EU Single Market, shipments from and to the UK are expected to require customs declarations for import and export in line with new, upcoming trade agreements and duty tariffs.
With this, the volume of customs declarations that UK companies, their trading partners, and customs authorities will need to manage following Brexit is expected to increase significantly. And the upcoming, major system transition from the current HMRC customs system CHIEF to the new system CDS further amplifies the challenge that traders are facing in this dynamic environment. According to media reports, HMRC voiced concerns about coping with an expected five-fold increase of declarations to process following Brexit.
To prepare for any post-Brexit impact, businesses should ensure that all teams, key business partners, and customers are aware of ongoing developments. They should also ensure the required knowledge and systems are in place to a) manage new customs procedures (EU traffic vs. import/export) and b) cope with the increase of transactional volumes in an efficient manner – without compromising supply chain performance.
But Brexit isn’t the only reason to take a closer look at global trade and customs processes. This area is constantly changing – driven by global security concerns and trade developments – and harbours great potential to accelerate and secure supply chains, improve service, and generate savings.
Savvy businesses take advantage of, for example, temporary storage in customs warehouses, also called bonded warehouses, which are a good opportunity for storing parts from third countries outside the UK on an interim basis while saving customs duties. Goods stored in a customs warehouse are under customs supervision, making it possible to hold them without officially importing them into the UK until the customer requests them – and only then do the customs duties and licensing requirements apply. If the goods are subsequently sent back out of the UK (transit), no fees apply at all.
Another highly relevant procedure is inward processing. Sometimes the easiest way to repair defective parts or small equipment is to ship them directly back to the plant where they were manufactured. If goods are manufactured in the UK, for example, then sold to the US and returned to the UK for repair, no customs duties will be assessed under the inward processing procedure if the goods leave the UK again once the repairs are complete. The same customs procedure is available the other way around: under outward processing procedures, duties can be saved when returning applicable goods to the UK after repair abroad.
But it’s not just about which customs and global trade procedures you manage – it’s also about how you manage them. Having the right tools in place to manage the complexities of ever-changing procedures efficiently is a major success factor for generating value through customs processes and achieve a competitive edge in today’s dynamic marketplaces.
Iqubal Singh Pannu
Iqubal Singh Pannu is Senior Solutions Consultant at AEB in the UK and has been with the company since 2006. With considerable consultancy and project management experience, spanning several areas of the supply chain, Iqubal is advising companies on solutions for optimising supply chain performance and generating value through automated global trade and logistics processes.