Reducing Logistics Friction in a Post Brexit Economy

By Martin Meacock, Director, Product Management, Descartes Systems UK

Pre-Brexit, the biggest issues facing hauliers and logistics managers in getting goods between the UK and Europe were occasional strikes by French Customs officials, ferry delays and roadworks on the M20. Halcyon days. Most journeys were fairly frictionless – goods were picked up, transported and delivered without interruption or delay. And, as a result, pricing was consistent and supply chains optimised.

Since then, life has become more complex due to the regulatory friction introduced as a result of Brexit. Added to widespread global supply chain disruption; driver shortages; rising fuel costs; and an increasing focus on sustainability, the on-going overhaul of the UK’s customs declarations system is creating a daunting environment for fleet and logistics managers.

With costs spiralling, the pressure is on to move goods with as little friction as possible. But with constantly changing rules, how can any business feel confident in forecasting either the cost or timeline for shipments?

The UK government has attempted to minimise friction through the decision not to apply certain checks at the UK side of the border,including the safety and security requirements introduced post 9/11. Importers and exporters still face an array of regulatory requirements, however. Before making any journey across either the Channel or the Irish Sea, firms have had to learn new customs declarations and authorisations and get used to different systems and processes.

In Europe the impact started from day one, with import and export declarations required immediately. In the UK there was a period of relaxation and a phased approach intended to allow companies to adjust.

In addition to the French Logistics Package, the Pre-Boarding Notification (PBN) required to enter Ireland and the Goods Vehicle Movement Service (GVMS) required when bringing goods into the UK, there are specific requirements for food – especially meat and dairy – and plants. All of the relevant documentation needs to be in place before a lorry can board a train or ferry.

The impact on the haulage market has been marked. Not only are price differentials between goods much higher, with food and plants costing much more to carry due to the additional checks and controls applied – but no company will set off on a journey without proof the ‘digital paperwork’ has been completed. The resultant slow-down in the supply chain has affected fresh goods, especially fish, with items having far less time on the shelf before ‘best before’ dates are hit.

On the plus side, the combination of reduced demand and pre-planning has avoided delays at customs – which has at least avoided another area of potential friction. Indeed, capacity is holding up well, despite the lack of drivers. With logistics managers allowing extra time to ensure documentation in is order, the actual journey is frictionless.

The challenge, therefore, is to reduce the cost and time associated with customs declarations.

In the UK, the replacement of the CHIEF customs system with the new Customs Declaration System (CDS) is well underway. All new customs import declarations and customers wanting to submit import declarations must now use CDS and traders will not be able to make export declarations on CHIEF after 30^th March 2023. So, will this make a difference?

CDS is certainly not being introduced to make the process easier for hauliers. Its goal is to collect information and taxes and maintain supervision of goods; its intention was to replace an old system and at the time to be compliant with the new EU UCC regulations. As such, it places greater demands on organisations to provide information. Indeed, businesses opting to work directly with the Customs’ provided system are reporting it is laborious, requires development and lacks support. For any organisation making a multi-item customs declaration, the process is incredibly slow.

However, dedicated customs technologies that integrate with CDS are easier to use and can radically streamline the process. Regular traffic can be managed simply through the use of integration, automation and templates, making it much quicker to generate declarations for repeat activity. In addition, the use of well-prepared master data, as well as functionality to streamline processes, can significantly reduce the time taken to make declarations.

Furthermore, these solutions can come with both support and training – including dedicated CDS clinics and group sessions to help companies understand the declarations process. The entire process can be automated if required, or information uploaded from an Excel spreadsheet if that is the way a business prefers to work.

While there is still some delay to the full implementation of the food and plant declaration systems, the post-Brexit regulatory landscape and processes are far clearer now than in the beginning, with less imagination and more reality. Now that hauliers have access to CDS, two distinct business models are emerging. Some hauliers are expecting importers and exporters to make or arrange for all the customs declarations and will only set off on a journey once provided with the reference numbers to prove the relevant declarations have been made to customs authorities, including the GVMS.

There is, however, an opportunity to offer a premium service by offering to remove the pain of customs declarations from customers and undertake the process on their behalf. For any company that has got to grips with the customs declarations processes and systems, this approach offers both a clear differential and a chance to generate additional revenue.

It will be important to determine how key information is provided and checked – such as ensuring the correct HS code is used. But there is likely to be strong demand for this level of premium service, especially in more complex areas such as food and plant distribution – as well as providing services to the SMEs that lack dedicated in house logistics expertise.

Opportunities also lie in move customs processing away from the border. This can take the form of either Temporary Storage facilities if only short term storage is required, whilst paperwork is put into order - or full Customs Warehousing if longer term storage and deferral of customs duties is sought. Use of these with gaining authorised consignee and/or consignor can be used to avoid some of the friction at the border.

It has taken a while – and the pandemic didn’t help – but the post-Brexit customs landscape is taking shape. Organisations are getting to grips with the new declarations requirements and, as a result, recognising that if a business can ship in and out of Europe, it can work with the US, Africa or Australia, providing the chance to expand market reach.

The shift to CDS is also likely to create a larger number of third-party service offerings – from hauliers offering a complete end-to-end solution to those partnering with brokerage services to support customers. Others will stick with the core haulage business and put the onus on customers to undertake the customs declarations.

Should anyone feel this is a UK-only problem though, will perhaps take some comfort that CDS is the forerunner of what is happening across Europe. New Customs systems are being implemented to meet those same UCC regulations - from DMS in the Netherlands through to TESS in Sweden. Even non-EU countries are not immune, with new Passar system scheduled for implementation in Switzerland. As with CDS, many of these are struggling to meet their original implementation schedules.

Whichever route organisations take, with the right systems in place it is possible to automate and streamline the customs declaration process, creating a logistics model that is far closer to the frictionless experience of the past.

Descartes are here to help you navigate your UK customs Imports and Exports; whatever changes get thrown your way. Stay on top of changing processes and regulations with cloud-based software solutions for every aspect of UK customs, from declarations to customs warehousing. www.descartes.com/uk/cds. Or email info@descartes.com