With just over a year to go, and with January being the month of grasping the nettle, it’s time for businesses to get on and start planning for cross-border trade post-Brexit.
Customers, whether other businesses or consumers, have grown accustomed to having goods provided on demand. Supply chains have developed to do so in a smooth and efficient manner. With 60% of all UK trade being with the EU, there are naturally concerns that Brexit may see the loss of the current frictionless border arrangements with the imposition of customs tariffs and other restrictions.
These concerns are best illustrated by figures reported by the Chartered Institute of Logistics & Transport. Dover and the Channel Tunnel handle 3.7 million freight movements per year, an average of 11,000 trucks a day in both directions (more at peak times). 28% of the UK’s food is imported from the EU, 80% of that on those trucks. Even a minor delay at the port could have far reaching consequences – with impacts doubtless being seen in availability, shelf life, waste and prices.
Strategic decisions on goods and trading
Brexit may still be 15 months away and the final outcome of negotiations far from clear, however, that does not mean you cannot be taking steps to seek to ease the passage of your goods to / from the UK. Strategic discussions on supply chain sourcing and locations are doubtless ongoing amongst multinationals and major businesses. Work and advice will equally be required on classification of goods and on trading terms going forward.
Authorised Economic Operator (AEO) scheme
In the meantime, whether your business engages directly or indirectly in international trade, you should consider becoming certified by HMRC under the Authorised Economic Operator (AEO) scheme.
AEO status is an internationally recognised quality mark indicating that your role in the international supply chain is secure and that your customs controls and procedures are efficient and compliant. It will, in effect, mean your company becomes trusted and permitted to trade with far less intervention by HMRC or Border Force and their foreign counterparts than those who are not so certified.
AEO is a global concept aimed at promoting security and safety in the supply chain. It is not limited to those businesses which deal with customs matters. It is open to any size of business, from SMEs to multinationals, if involved in the international supply chain of goods which have been imported or are intended for export.
The advantages of AEO are:
- fewer inspections and other agency interventions;
- reducing fees and delays; and
- increasing competitiveness.
Fast-tracking consignments improves productivity and profitability. Reciprocal and mutual recognition arrangements for the likes of C-TPAT for faster international customs transits. In the medium term, AEO status offers access to the proposed customs self-assessment regime.
Like many New Year resolutions, this is neither a straight forward nor quick process. It can take at least 6 to 9 months.
Preparation is needed if the application is not to be rejected. This should be regarded as an investment, for which advice and support may be necessary. For many companies already engaged in international trade, the end of transitional arrangements following the introduction of new Unions Customs Code (UCC) rules in May 2016 means that compliance audit and finance models need to be looked at in any event.
There are three striking statistics about AEO recognitions by HMRC. Firstly, only 0.25% of UK companies engaged in international trade are currently recognised. Secondly, the pace of AEOs recognition has increased with a third of all approvals granted since June 2016. UCC introduction and the associated changes to inward processing relief and the 70% reduction in Guarantee Waivers (money held to pay for possible duties later) than the Brexit decision. Thirdly, although still a minority of applicants, there has been a significant uptake of AEO from end-users as well as the freight sector. They include ASDA, Boots, ASOS, Next, Trespass, Diageo, Nestle, United Biscuits, Honda, Rolls-Royce and Siemens.
As with many other initiatives, the adoption of AEO status by major retailers and manufacturers could “reach back” down the supply chain to create either a competitive opportunity or pre-qualification hurdle for suppliers…
Whether you decide to act or not, make AEO status is something you make a decision about – and not just an idea that you realise too late that you should have acted upon.