Context
Almost all products Import Services process, are made in the Far East and sold to customers in the UK, Eire and Continental Europe.
Import regulations and duty rates are currently uniform across the EU and it is anticipated in a Brexit transition extending 2-3 years from March 2019; the same regulations and rates will continue to apply both for the UK and the remaining EU. Consequently for products emanating outside of the UK/EU, we envisage status quo in terms of processing imports.
Where products have an EU origin, the status quo rules will similarly apply in transition and if not; then the regulations currently applied to FE origin products will be adopted. The latter would add cost and transit time to market for say French or German manufactured products selling into the UK and therefore in mutual interest we envisage reciprocal agreements will materialise. A contingency position could be holding some stock in the UK and selling ex UK warehouse if necessary. Import Services has recently been asked to scope provision of this type of service for two Continental based businesses.
EU product held in bond in the UK will be freely transportable to another EU destination. The process is simplified by holding stock under bond in the UK, which will permit the EU import to be as if goods were arriving directly from the FE. This scenario would also be pertinent to UK-Republic of Ireland trade.
Where FE sourced product is imported into the UK and then shipped to an EU destination, the movement into and out of Customs bond with payment of duty and VAT applicable, will be manifested electronically to comply with audit requirements and cross-border trade.
Q&A
1. Given the post Brexit circumstances remain unclear, what is Import Services’ view in terms of contingency planning for transition ?
Import Services is in a rather privileged position, close to the container port of Southampton and with all three sites Customs bonded. This means we can hold our Clients’ stocks free of VAT & Duty, which is only payable after our Clients make a sale and only then on the ordered quantity at the end of the transactional month. Our practices of managing order flows intra EU and outside Customs areas is already established, as is order tracking, documentation and reporting systems, for this purpose.
In terms of planning we envisage a program of expansion to accommodate the growth in demand for our services. This will involve doubling the capacity of our container port DC to 60,000 pallets opening mid-2020. Scale is also important to ensure we have capability to accommodate the lumpy influx of ever-larger container ships, carrying greater numbers of containers per vessel call.
2. What will be your biggest known challenge posed by Brexit / how are you planning to mitigate this ?
It is of course in nobody’s interest to experience a hard Brexit and because the UK is already starting from full membership, a mutually beneficial trading model should emerge post transition.
However the challenge ahead is obviously contingent upon the regime which emerges and compliance with potentially new rules governing commercial transactions and the physical movement across frontiers. In terms of the former Import Services is practiced and can adapt our systems to meet new regulations; however if a hard Brexit takes place and borders are not frictionless, the likely outcome will be a lengthening of order cycle time and potential stock build. To mitigate fall-out from the latter, clearly the shorter the period between container arrival at port, through stock receipt, order processing and pre-retailing; before distribution to end-customer, the better. Port-centric is an optimal FMCG model for direct distribution, particularly where vendors are pressed to balance order cycle time with supply chain cost. The latter increases disproportionately when stock holdings are fragmented and labour costs are significantly higher on the Continent. This is borne out in a recent third party study commissioned, which assessed the cost-benefit of a twin DC approach to UK/EU supply v a single UK hub site. Currently delivering to 64 Amazon sites across the UK and Continental Europe daily, grouping loads and route planning from a single UK hub makes sense; helpful in this respect is order consolidation via our managed ‘In House’ Bookings Services. Furthermore our processes developed with vested parties involving electronic exchanges of documentation such as ASN’s, which play a key role in containing administrative costs as per continued investment in TRAC IT systems, linking Clients, Retailers and Carriers cost-effectively.
3. Reports are circulating that post-Brexit we will see lorry queues and long delays at our ports / what are your views on this?
If a hard Brexit does take place, higher costs will follow as supply chains elongate, affected by processing between jurisdictions and physical movement across frontiers. The UK Government is already planning additional lorry holding pens for emergency purposes to maintain orderly flow, if this worst case scenario unravels.
Should a new trading model involve the above retrograde steps, then the issue will also be recruitment and training of Customs officials, plus physical capacity at borders pointing to the need for a lengthy transition. Hence demand for technology based solutions to enable clearance in transit will be acute given the above scenario and Import Services will seek to be advanced in this respect.
The use of other Ports, apart from Dover and the Channel Tunnel will also come into play, to reduce pressure via the principal freight corridors.
4. Do you think the situation surrounding a potential Irish border will have implications for both British and Irish businesses ?
Politically reintroduction of a border in Ireland is unacceptable and this is not anticipated. Trading arrangements between the North and South may well promote further use of freight hubs, which is typically how the current model works in terms of regional trade and distribution. Clearance of freight if necessary can also take place electronically and while freight is in transit which would alleviate Custom controls.
5. Do you foresee Irish retailers buying directly from European suppliers to bypass British border and Customs issues?
Market pricing as always will determine trading patterns, however we believe trade between the UK and NI/Eire will continue unabated. Furthermore, opportunities flowing from Brexit should buoy UK Import and Export trade in our view. We are already seeing demand for this in terms of mounting interest in a UK based single retail logistics hub, particularly for US vendors.