The United Kingdom is set to leave the EU. If negotiators from Brussels and London have not reached an agreement on an orderly Brexit by October 31, 2019, and postponement of the date is unsuccessful, the outcome could be a “no-deal” Brexit. This would have grave consequences for global trade and, consequently, also for logistics. For this reason Arvato Supply Chain Solutions introduced initial measures more than a year ago to prepare our customers as best as possible for such a scenario.
“Using the exit date, we calculated backwards to determine the latest date on which we must start preparing in order to serve as many customers as possible with the resources available,” explains Sonja Holz, Director of Customs & Trade at Arvato Supply Chain Solutions. In April 2018 the first internal meetings and webinars took place in which the various exit scenarios were introduced and played out. Employees responsible for Brexit implications in the various business units were sent regular and detailed updates to inform them on the status of negotiations and to familiarize them with technical details and emergency planning. The next phase was then launched in October 2018. A project leader was named for each business unit, who collected information from customers using a detailed questionnaire to then work with them to plan preparatory measures. “In this extremely complex issue it is essential that our customers provide us with all relevant data and information – at the outset, and not somewhere in the middle of the process. This is the only way to effectively assist them,” says Holz. “We have been working on the assumption that companies without a Brexit strategy will need at least three months to get ‘Brexit-ready.’”
Additional Costs Are Not the Biggest Problem
The last step in preparations is presently the most difficult. Complete readiness would also mean making available all documents necessary for the import and export of goods. However, at this time, affected companies are working mainly on the basis of emergency plans, because there are still no binding laws or procedures for the period after the exit. The uncertain legal situation makes it extremely difficult for all involved to prepare for the new situation. If there is a disorderly Brexit, products and merchandise such as clothing would be subject to a 12% customs duty. “Costs are only one aspect of international trade in goods; they are a normal part of commerce,” Holz comments. Much more important is how to deal with what is called “non-tariff trade barriers,” such as licenses, standardization or inspections: Which licenses are necessary for importing and exporting medications? Can I still import goods with a CE mark?
The answers to these and many other questions are provided only by information and transition scenarios, and are only applicable for a limited period after a hard Brexit, despite the fact that these very issues will have far-reaching consequences for service providers and their customers. Companies that have not fully prepared for this could quickly get frustrated by the multitude of complex processes and policies. Inadequate preparation for Brexit can even become a competitive disadvantage.
Despite the precarious situation, many companies are biding their time and waiting to see what will happen. This approach was never an option for Sonja Holz: “The withdrawal of the UK from the EU means not only immense delays and additional costs, but in particular more complex procedures and more bureaucracy. We are trying to prepare for this in the best possible way with the resources and information available. Our customers informed us beforehand regarding how their flows of good and finances will change. We then evaluated the processes, where necessary, and developed solutions together.”
Arvato Supply Chain Solutions Is Making Its Customers “Brexit-ready”
The topic commonly discussed is master data management. “As with all other third countries, we will be required to complete and process additional documents in order to even submit a customs declaration. However, exactly what the setup for the UK will look like is totally unclear. Anywhere between two and five additional documents is possible,” explains Lisa Marx, Senior Manager in the Customs & Trade team. It will be a challenge especially for the companies that do not have their own customs department and are not familiar with legal requirements and rules. “Processing customs matters with third countries such as the USA, Russia or China is routine for our employees. They know very well which forms must be filled out, where and by when they need to be submitted and what specifics to pay attention to,” notes Lisa Marx, who feels that Arvato Supply Chain Solutions is well prepared to also deal with the challenges for the UK.
“To ensure a smooth data flow including all operational processes, we need all relevant information from our customers and the support of all parties involved in the process. Only when everybody works together can we manage this immense change process.”
Senior Manager Customs & Trade at Arvato Supply Chain Solutions
In the meantime, Arvato Supply Chain Solutions has made customers from all types of industries “Brexit-ready.” “First we must make sure that our customers’ business operations can continue to function. That is the first priority,” remarks Marc Hansmann, Group Controlling & Strategy at Arvato Supply Chain Solutions, who coordinates Brexit preparations across all business units. “A special challenge in this project is the impact of political decisions on processes of our customers, transport companies and other service providers.”
In dealing with these challenges, Arvato benefits in particular from the cross-sector expertise it has accumulated in the past ten years, both in logistics and in the areas of customs and compliance. “We can even offer customers added value that they would not receive at this level from any other logistics service providers,” says Sonja Holz. “At the same time this combination of logistics know-how and customs expertise is an important unique feature that sets us apart from competitors.”
A well-prepared service provider can therefore become a decisive advantage for companies. While on the one hand the processes are adapted quickly and specifically and the necessary know-how is already available, companies that have not or only insufficiently dealt with the Brexit have to correct this error time-consuming and cost-intensive. Brexit can also be an opportunity for well-prepared companies.
If you want to know, what other essential services the Customs & Trade department of Arvato Supply Chain Solutions provides and why it is even market leader in some areas, read more here.
Bypassing the Chaos
Customs processing: An opportunity In the course of the negotiations between the UK and Europe, it was decided that the flow of goods for the roll-on/roll-off destination (Eurotunnel) must be processed at the border, yet even now it is obvious that there will not be enough personnel on the UK side nor enough IT capacity to process the large number of customs declarations.
One way out of this could be to allow companies with a customs approval to drive their trucks directly to their operating facilities. “We would thereby move the border for Arvato Supply Chain Solutions to our operations in Hams Hall and take care of customs processing there.” This would save our customers, a lot of time and money,” which, according to Holz, would be a way of avoiding the feared Brexit chaos at the border. Applications for the necessary approvals are currently being submitted.
The UK’s departure from the EU will leave significant marks on the international logistics and transportation industries. However, Holz is still optimistic about the future: “Regardless of how the situation develops, we have prepared for each scenario and will provide our customers with effective and ongoing assistance in this difficult situation.”
Patrick Corbett is in the middle of Brexit. In an interview, he explains the challenges a hard Brexit would pose and how Arvato Supply Chain Solutions as an international service provider deals with them.
1. Mr Corbett, fears are growing worldwide regarding a hard Brexit. What effects would this have on Arvato Supply Chain Solutions in the UK?
A hard Brexit certainly would entail significant risks and potential disruption for our customers’ supply chains. Taking into consideration the new and difficult situation, in particular regarding the import of goods and customs processing, it is very probable that short-term steps will be necessary – for example, increasing inventories in the UK or shifting UK sales operations from central EU sites directly to the UK.
2. How important is the UK business for Arvato Supply Chain Solutions and what changes do you expect after Brexit?
The United Kingdom is one of the largest European e-commerce markets and is important for all of our customers. This will still be the case after the Brexit decision. This also means, however, that we must get a handle as quickly as possible on those topics that require a certain amount of lead time. These include, for example, the rapid provision of additional storage space and the development of innovative IT solutions for the post-Brexit era. We have no time to lose.
3. What preparations has Arvato Supply Chain Solutions made?
We are working very closely with the affected customers to minimize possible risks. For example, we have set up a commerce taskforce to evaluate the steps that can be taken in the event of a no-deal Brexit, in order to optimize the transport of our customers’ goods to the UK. In the meantime we have positioned ourselves well and developed a number of short-term and long-term solutions that will surely be useful in this scenario.