As Brexit negotiations begin, Roy Baker, Director, International Forwarding, reviews the likely options facing European logistics and why freight forwarders with Authorised Economic Operator (AEO) status will be better placed to help import-export business navigate the bumpy road ahead.
We were hoping the June general election might mean that we could put the crystal ball back into its box but it is now clear that it going to be a while before that can happen. Even if our negotiators make reasonable progress in Brussels our Parliament is now able to exercise far more scrutiny over the detail of Brexit, which can only add frustration and delay to the process.
It is now more than a year since the EU referendum result and here at International Forwarding we would have expected to be in a reasonable position to give advice to customers on the likely way forward to trade with the EU and worldwide – but nothing could be further from the truth.
The fact is that the main drivers for the decision to leave the EU were the desire to restore UK political sovereignty and for the country to have control of its borders. The business community did flag up the repercussions for finance and trade but these were lost in the clamour to achieve these objectives.
So will we get a hard or a soft Brexit?
The most likely Brexit deal
While the fundamental principles of EU membership – free internal movement of labour, goods, capital and services – are incompatible with a soft Brexit, it is in the economic interests of the remaining 27 EU member states to retain border controls for goods that are as frictionless as possible.
The answer is likely to be somewhere between hard and soft options with a model based, perhaps, along the lines of existing EU trading arrangements with Norway and Switzerland, coupled with a transition period. There will be pressure on both sides not to impose a physical border in Ireland and a particular pinchpoint for trade will be the port of Dover.
The main carrier across the English Channel, Eurotunnel, has never operated in an environment outside the EU. On average, some 10,800 road-freight vehicles cross the Strait of Dover each day (up from 3,000 pre-EU), with around two-thirds travelling by ferry and one-third through the Tunnel. Currently UK Customs handles 90 million declarations a year for non-EU goods but it is estimated that this would increase to 300 million if all EU trade were to be included, according to The Times.
Dealing with the Brexit customs surge
It would seem logical to split the control of declarations for EU trade post-Brexit into two categories.
The first would be a security declaration by the carrier to give the UK Border Force the opportunity to make a physical inspection if deemed necessary. This type of declaration could be in a simple electronic format and there is a precedent for this in operation already for maritime cargo.
The second would be a fiscal declaration to assess the liability for duties and VAT. It would be highly desirable if this declaration could be linked to a self-assessment/postponed accounting arrangement to be used by accredited traders.
This ‘trusted’ trader concept already exists in the UK under the title of Authorised Economic Operator (AEO), which is an accreditation given by HMRC to traders/forwarders/carriers who have been through a stringent audit examination. AEO status is an internationally recognised quality mark indicating that your role in the international supply chain is secure, and that your customs controls and procedures are efficient and compliant – and it is increasingly being asked for by customers, according to CILT.
Brexit and the Authorised Economic Operator
Although AEO is widely used in the EU and is part of the Union Customs Code it was originated by the World Trade Organisation and has been widely adopted in the USA and Japan.
International Forwarding has been AEO-approved since 2010 and it is our view that AEO accreditation will give companies who have this a head start in trade facilitation both during a post-Brexit transition period and as part of the finally agreed procedures for trade with the EU.
We will be pleased to provide further information to customers on request on both AEO and the likely effect of changes resulting from the Brexit negotiations on all aspects of international trade.
You can also see our other memberships and accreditations here.