March 17, 2022

Major challenges in customs due to international sanctions

Russia's attack on Ukraine has also had a massive impact on the logistics industry. A number of carriers have suspended their delivery services and are holding back shipments that are already in transit until further notice. Similarly, a number of shipping companies are no longer calling at ports and airspace has been closed. The sanctions imposed on Russia by Western countries as a result of the attack are also having a noticeable impact on the international movement of goods. Sophia Stirm, Head of Solutions Customs & Trade and Maja Kuhnt, Head of Competence Center Customs & Trade at Arvato Arvato Supply Chain Solutions explain the current situation.

Maja Kuhnt, Head of Competence Center Customs & Trade
Sophia Stirm, Head of Solutions Customs & Trade
What effects are felt in the international movement of goods?

Shipments to and from Ukraine, Russia and Belarus have been massively affected. For example, carriers such as UPS and DHL have suspended their shipments. We are currently clarifying what is still possible by land with our transport management department, primarily for medical goods. At the moment, however, there are major clearance problems at the western Ukrainian borders. Many carriers have also suspended their shipments to Russia until further notice. Our transport management department has compiled an internal overview of the current situation with the statements of the individual carriers.

Sea freight and air traffic have been massively affected. Ukrainian ports are no longer being called at by shipping companies, flights can no longer pass through the closed Ukrainian airspace and are being diverted. According to information from our staff in Russia, it appears that ports and airports in Russia are also closed. It is still unclear whether the closures only apply to European shipments or whether shipments of goods from China and other countries are also affected.

In addition, there are reports that cyberattacks are currently also being carried out on Ukrainian and Russian freight forwarding companies. I think this is where it pays off that we have invested so much in our IT security - not only in transport management.

Which businesses are affected?

Currently, there is no general export ban against certain countries. Therefore, these are case-by-case reviews and fundamental business decisions on an ethical/moral basis.

Our export deliveries are therefore not currently affected by the sanctions and imports are only affected to a minor extent. This applies in particular to imports of wood articles from Belarus. Here we were able to sensitize purchasing at an early stage and develop new strategies with our customers. Nevertheless, the sanctions are being felt in all businesses and now affect not only the Donetsk and Luhansk regions, but also Russia and Belarus. The financial sanctions, which also include Russian participations, have a particularly strong impact. From the EU's point of view, these are very extensive, which means that more checks are required, especially in terms of compliance screening. This works smoothly for us, but at the end of February alone there were more than 50 updates in a very short time for the EU sanctions.

What exactly is the situation - are goods already piling up?

Many of our customers have completely stopped shipments to Russia, Ukraine and Belarus and deactivated their local online stores. For some customers who continue to deliver, shipment verification is carried out in close coordination with the customers. Each shipment delivery is a case-by-case decision here. We also have to look very carefully at the choice of carrier, as the largest providers we use no longer deliver to the areas in question.

How can customers currently be supported?

Since the new sanctions came into force, the Customs & Trade department has constantly and consistently monitored them and examined the extent to which our businesses and customers are affected. We are in close contact with customers and discuss how to proceed. Thanks to our expertise, we have been able to assess the impact well so far and have drawn up an overview of the sanctions to be observed. Our Customs & Trade department is highly specialized and deals with all customs-related issues and foreign trade matters in its normal customer and day-to-day business. This also includes the control of foreign trade and compliance regulations. With our expertise, we can also enter the new regulations and sanctions lists into the system very quickly and match them with orders. Although this involves a great deal of effort, it is appreciated by customers, as it enables us to protect companies from enormous damage. For customers around the world, we have become the specialist who is not only exceptionally well versed in the two topics of logistics and customs, but who can also, above all, act on a customer-specific basis. Coupled with our experience and the know-how we have acquired over the years, this combination is unique and makes us indispensable for many companies. Therefore, we can also advise our customers on possible further sanctions that are being discussed against Russia and also Belarus.

What happens if sanction rules are not observed?

Violations of foreign trade law always constitute a criminal offense - with significant financial consequences up to and including imprisonment. Furthermore, in the case of intentional actions, the respective company itself can be placed on a sanctions list. To counteract this, we carry out extremely strong monitoring in order to advise our clients and, in the worst case, to be able to protect them from penalties by means of a self-disclosure.

How are will the new requirements be implemented?

In order to be able to implement the new specifications and requirements quickly, all those involved are working closely together - Customs & Trade, Transport Management, the account management of the respective customer, and our IT. We have currently implemented a country block for Russia, Belarus and Ukraine in our customs software as a precautionary measure, so that we can then examine on a case-by-case basis. Each shipment to these areas is a case-by-case decision and is carefully checked by our trained trade staff for compliance with the sanctions.

How is the currently valid information obtained and updated?

The most important source are the pages of the authorities. We are guided by the Official Journal of the EU on EUR-LEX. Only when the sanctions have been published there are they actually legally binding. Information from the media that sanctions have been uniformly adopted, for example, does sharpen the view, but it is not sufficient to be legally binding. So we have to look carefully at every piece of information and every source.

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Sonja Groß

Marketing & Communications