The UK’s transition following its departure from the EU ends on December 31st. Morpheus.Network can help your business thrive through the tough times.
Whether we end up with a trade deal or no trade deal, Evidence from our friends in Canada, USA and Mexico have demonstrated that Morpheus can address the documentation driven challenge that is Brexit.
For 47 years exporters and importers have sent goods to and from Bristol, with as little thought as they need to put into sending goods to Berlin. However, these past 3 years exporters and importers have been rightly worried about the thought of going through all the effort of getting the right products on the right trucks at the right time, only to have them stopped at the border crossing because of a lack of the right documentation.
With 64 days to go and counting (http://daystobrexit.co.uk/) the pressure is mounting on invested parties – which as we are talking about the world’s 6th largest economy is most of us. Indeed the political current affecting the outcome of the Brexit trade talks is not limited to the UK and the European states. As Joe Biden is set to become the 46th President of the USA, significantly reducing the immediate possibility of a preferential USA – UK trade agreement, some political commentators suggest that Mr Johnson is more likely to require a soft border instead of a hard one following Brexit. However, there is another option to consider:
Authorized Economic Operators (AEO) together with FAST entry and emerging technologies are proven to provide a global trade solution that meets quality, quantity and delivery SLAs while providing digital duty calculations for HM Customs and Excise. They could also provide food regulatory compliance while helping UK Border Force combat entry of black market, counterfeit or contraband goods as well as impeding diversion and grey markets development.
Is it really that simple?
In a word: no. While the UK Government has set out a five-step guide to delivering the fundamental phases that a company must complete, the transitional period ahead is one that will inevitably be riddled with stress, confusion, and new obstacles for UK businesses to navigate. The timeframes involved only add increased pressure and complexity.
Furthermore, despite the rapidly approaching deadline, even the government rulings are far from solidified at this stage. Even the procedures surrounding trade passing through Northern Ireland from England, Scotland, and Wales remain inconclusive at this stage as a repercussion of the backstop being rejected three times within the negotiations.
A wide range of contributing factors influences the political and economic landscape heading into this unprecedented transition. World trade growth has swelled 4 times since the 1980s to USD $20 Trillion while the Certificate of Export (CoE), Certificate of Origin (CoO), and Waivers and Exemptions are used by border control teams under World Trade Organization (WTO) regulations to prevent entry to the black market as well as counterfeit and contraband goods.
At the June 2005 World Customs Organization (WCO) Council Sessions in Brussels, WCO Members adopted the SAFE Framework of Standards to Secure and Facilitate Global Trade. This unique international instrument ushered in modern supply chain security standards and heralded the beginning of a new approach to the end-to-end management of goods moving across borders while recognizing the significance of a closer partnership between Customs and business. The Framework was last updated in 2018 to effectively address new and emerging developments in the international supply chain. Notable additions were provisions on Authorized Economic Operators (AEO).
The final decisions regarding the hard or soft border will naturally impact future timeframes and procedures. Businesses wanting to stay one step ahead of the game will want to complete the steps mentioned later in this guide. In the meantime, the following steps can be embraced;
- Spend time reading the full government guide, including the pages linked from the main five-step guide navigation,
- Call HMRC to verify details of any features you’re currently unsure about and to check all info held on the company’s file is accurate.
- Research the UK’s trade relationships with many countries where your business enjoys a lot of trade or expects to see in 2021 and beyond.
It is also an opportunity for UK businesses to follow the country’s lead by opening partnerships and trades with international clients from outside the EU. https://oec.world/en/profile/country/gbr/ The United States is the leading destination with 13.4% of exports, China and HK 6.78, while India, Australia, Canada hoover around 1.5%, roughly the same as Demark.
AEO approval in Europe
For businesses that still wish to enjoy a thriving trade within the EU, seeking AEO approval will be essential. The European Union remains the only authority that can accept your application to become a trusted trader supported by the internationally recognised honour of quality.
While the membership has existed for some time, just over 1,000 UK businesses (across AEOC, AEOF, and AEOS applications combined) had gained the status by November 2020, although that figure will have increased significantly by the start of 2021 as the smartest operators bid to capitalise on the opportunities that the scheme presents. The benefits include;
- Priority clearance and few delays in despatch,
- Supply chain security and transport security,
- Waivers of deferment and reduced admin work.
Throughout the application, your company’s finances, shipping procedures, and history of compliance will be scrutinised while there should be evidence of established international trade. The application process can ordinarily take anywhere between three and 12 months, which is then followed by a 120-day assessment phase.
While this does pose a few issues through this transitional phase, it is still a process that UK businesses wanting easy trade deals with EU member states will want to consider, not least because of the Morpheus.Network Trusted Trader Platform offers a streamlined process to secure a post-Brexit trade deal you can rely on.
So is the answer for the UK Government to set up its own version of an AEO?
Given the low number of UK companies currently signed up to the AEO via the European Union, the UK Government’s post-Brexit strategy may well include an alternative version to the AEO. After all, it’s not simply a scheme that provides authorisation for UK companies to maintain their EU-based trade activities after December 31st. AEO membership verifies trust and reliability to all other members of the supply chain (in addition to the multiple benefits mentioned above), which is something the UK authorities may be keen to promote with an alternative version of the accreditation process.
While the UK was a member of the EU for 47 years, the EU’s AEO scheme was actually only launched in 2005. So, the UK Government wouldn’t be faced with a major catch-up assignment, especially as the blueprint for creating a simplified customs process with international recognition and commercial benefits is already in place.
A UK alternative to the AEO application would make a statement of intent while also supporting UK companies as they bid to maintain many of the benefits that would’ve accompanied a Remain vote back in 2016, thus allowing them to enjoy the best of both worlds. Following the global economic turmoil caused by the COVID-19 pandemic, it could appeal to the government too.
How could it manifest itself?
If they did, then they could rely on a trusted trader approach similar to NAFTA. Since NAFTA was signed into law in 1994, it has created a virtually tariff-free trade zone and trilateral commerce between USA, Mexico and Canada has quadrupled to USD $1.3 trillion. It was updated within 2018 and was ratified in 2020 and is now known as USMCA.
USA Customs and Border Protection (CBP) CTPAT is the voluntary security certification for AEO supporting 53% of imports by value into the USA. A twelve-part certification covers Cyber, Physical and Procedural Security including mandates that shippers work with their transportation partners to track goods from origin to final destination point.
Such has been the success of the USMCA trade agreements and security certifications such as CTPAT, that Laredo is currently the USA’s busiest port and the worlds busiest land port of entry. In 2018, it handled 2.30 million trucks from Mexico to the USA. By contrast, Europe’s largest port and #10 in the world, Rotterdam World Gateway, has roughly a similar capacity of 2.35 million TEU. Rotterdam’s capacity is also equal to all the UK ports combined.
Are you ready for a no-deal Brexit?
Whatever political solutions are determined over the coming weeks, the time for businesses to prepare ahead of this transitional phase is rapidly running out. While monitoring the situation of AEO’s at a government level is highly beneficial, individual business owners must learn to prioritise their own preparations heading into 2021.
Unfortunately, government research indicates that most companies who currently export products solely to EU countries are not fully prepared for a no-deal Brexit and will be set to face some very difficult moments in the months ahead, not least because those situations are exacerbated by the impacts of COVID-19.
Whatever Brexit has in store, implementing a reactionary response is simply not an option. Instead, you must pre-empt and prepare yourself for every possible outcome. After all, Brexit is likely to flip your company’s approach to selling within the EU on its head. Your current producers will no longer hold value, resulting in non-compliance with the updated regulations and the consequential prohibition from future exporting endeavours.
To avoid this outcome in which you could be deemed to be trading under the World Trade Organisation (WTO) regulations, your business must implement a post-Brexit strategy that focuses on the following steps:
1. Understand the licencing and regulatory requirements
Not all businesses are required to apply for an EU exporting licence, but it will be necessary for companies planning to trade any of the following:
- Agricultural products,
- Medical devices,
- Excise goods (including tobacco and alcohol),
- Controlled goods (including firearms and military items),
- Animal products.
It is imperative that you understand which bracket your products fall under and whether any licence applications will be required to satisfy compliance obligations in any given EU territory. For example, anyone looking to export food, drink and agricultural products that contain products of animal origin (POAO) from Great Britain (England, Scotland and Wales) to the EU after December 31st will require export health certification. The classification of your goods can be found online in a very quick time.
2. Understand documentation and process requirements
In addition to a licence that permits you to export products to EU territories, your business may also be required to obtain new product documentation as an upshot of UK and EU standards becoming misaligned, which is a likely scenario. Therefore, it will be necessary to:
- Remove any out-dated items, such as food items displaying the EU Organics logo,
- Confirm that all paperwork meets the post-Brexit regulations,
- Verify that all labels are aligned with the standards set by individual nations.
Modern emerging technology platforms can automate several procedures for smooth transitions and streamlined processes in a post-Brexit environment. Morpheus.Network’s Trusted Trader Platform integrates with over 100 industry-leading technologies and service providers, subsequently ensuring that label printing and documentation processes are automatically completed in compliance with the latest expectations. In turn, this saves your company time and money while bypassing any fears of missing key documentation.
3. Get Your EORI number
All companies trading within the EU will need an Economic Operator Registration and Identification (EORI) number in the post-Brexit era. It is a number used to identify your company as an importer/exporter. It additionally tracks all trade between the EU and non-EU territories, which will naturally become more pertinent on January 1st. Ahead of this time, you must verify that you have an EORI, which may have been provided in the following ways;
- From HMRC, who sent out EORI numbers to all VAT-registered companies in August 2019,
- From other EU member states (although it should be noted that these can only be used temporarily),
- By contacting HMRC’s dedicated EORI team to confirm your number or request one.
Under most circumstances, applications made through the UK Government website are processed within a few days. However, as the deadline draws closer, delays could be expected (not least due to the festive period). Therefore, it is highly advised that you complete the process ASAP.
4. Plan your goods exportation strategy
Gaining the certificates and documentation that will permit you to trade within the EU will lay the foundations, but your business must also consider the logistical challenges in a post-Brexit era. The Common Transit Convention is the best solution by far because it;
- Promotes quicker exporting and allows you to avoid some customs declaration requirements,
- Reduce costs by limiting custom duties to the customs offices at the final destination,
- Remove some of the border-related export procedures.
In addition to an EORI number, your company will need to complete a registration at the New Computer Transit System. Following this, you’ll need to verify that goods are guaranteed in transit. Subsequent deals with customs can be handled directly or through an agent, broker, or freight forwarder via written permission.
Supply chain security compliance reduces losses due to product damage, shrinkage, waste, and counterfeiting. End to end shipment visibility guarantees regulatory compliance and reduces over costs (delays, fines, SLA, rework, reverse logistics) while creating a more effective team. Real-time inventory, reliable ETAs and an ePOD improve plant planning and utilization on Inbound shipments and accounts receivables on Outbound. Irrespective of final outcome decided by politicians, the Trusted Trader Platform will enable ImEx and Supply Chain managers to focus their attention on other challenges for creating more resilient, reliable and less risky supply chains, in this immensely uncertain period.
Morpheus.Network and Supply Chain Precision have developed a Trusted Trader Platform for automating safe and secure supply chains while being pro-trade. Find out more about the Brexit trade preparations by contacting our agents today!
Anyone who wishes to find out more about Supply Chain Precision is encouraged to make use of the following contact details:
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