Logistics providers reading the headlines about Brexit may well feel uncertain about how their business needs to transform. A range of potential outcomes, from a soft Brexit to no deal, makes it difficult to know what the UK’s future trading relationship with the EU will look like. Although much is in the hands of the government, freight firms shouldn’t wait for negotiations to conclude in order to prepare. In fact, by putting their heads in the sand they may risk falling prey to operational paralysis in the face of a wild customs landscape.
Free access or hard border?
Even if the UK government secures the softest possible landing, the processes used to trade with the continent today will be replaced with something new. Current models for trade between the EU and other countries will cease to apply to the UK, leaving logistics providers looking for a new set of regulations.
It’s impossible to know what a final deal will look like, but there are many things that freight logistics companies can do in advance of the Brexit deadline. While no-one pretends that trade and cross-border transportation will run smoothly in the immediate post-Brexit period, businesses that start preparing now have the best chance of successfully navigating this uncertain new world.
Accustomed to change
One of the great challenges of the post-Brexit relationship between the EU and the UK is the potential for change in customs declarations, with a parliamentary report warning of “catastrophic” consequences, such as massive tailbacks at the Channel ports and perishable goods being left to rot at the border.
Certainly, there will be a need to lodge ‘normal’ customs declarations, but there’s no reason why this has to take place in Folkestone, Portsmouth, or Dover. Whatever Brexit scenario pans out, there will not be a need for complex new technology at the border. If businesses cannot support customs entry effectively, however, it will likely cause severe bottlenecks in the back office that can be as disruptive as any delay at the border.
Logistics companies should be aware, for example, that the government is replacing its import/export processing system, CHIEF, with the Customs Declaration Service (CDS), currently being phased in. The new system requires different data from CHIEF, but the requirements have already been published.
Logistics businesses must ensure that their systems are able to generate and process the required data at speed and avoid creating admin bottlenecks that will delay business. A high-capacity customs solution will also be useful, helping companies to streamline processes.
We may well be entering a new economic era defined by trade wars, not least after the US President announced $50 billion-worth of tariffs targeted at China. Much is being made of the UK’s exposure to EU import tariffs for a range of goods and services. After Brexit, it’s estimated that declarations to UK Customs will increase to more than a quarter of a billion each year, while the number of UK firms needing to make a declaration will double to over 270,000. The cost of purchasing goods from outside the UK may also be impacted, putting further pressure on logistics firms to deliver reliable and cost-efficient services.
While the question of tariffs lies largely in the hands of the negotiators, businesses can get access to the most business-friendly procedures by becoming an “authorised economic operator” (AEO). This is the gold standard of international trade – a self-policing system that demonstrates that a business has a consistently exceptional level of compliance.
AEO businesses experience significantly less hassle at customs borders, helping to keep goods moving. It’s possible that you might not have heard of AEOs, yet it could be crucial for freight logistics companies, especially those which operate across the Irish border. Currently, less than half a percent of UK businesses have AEO status – ten times fewer than Germany. Logistics businesses are wise to make researching their eligibility a priority, especially as it can take six months or more to be accredited.
There is certainly reason to feel apprehensive about what the future holds for UK-EU trading relations. But the freight industry must not feel powerless to prepare. Innovations that are already improving supply chains will also deliver the agility and resilience needed to keep up with new circumstances. It is time to harness the power of emerging technologies that will help us navigate regulatory change. Otherwise, freight businesses risk coming to a grinding halt.
Mohit Paul is VP EMEA of BluJay Solutions