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Less than three months from the end of the Brexit transition period, what are the practical steps retailers can take now? PART 2 Customs, warehousing and logistics

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It’s now less than three months until the end of the Brexit transition period, and there is still no final deal governing how the UK and the European Union will trade from January 1 2021. But while uncertainties remain, many details of the future relationship – and what retailers need to do when importing from or exporting to Europe – are already known. Last week, we outlined the future VAT arrangements and how to get those vital EORI trader numbers. Today we look at customs, warehousing and logistics. While this guide cannot replace professional advice, it does aim to highlight the key areas that traders can plan for now. 

Customs: what’s already known about customs – and what’s not?

Even though a post-Brexit trade deal is not yet in place, it’s already known that there will be effects on customs. Retailers will need to make safety and security declarations on goods leaving Great Britain for the EU and vice versa. This, says the UK’s government’s guide to exporting post January 2021, extends rules that already apply when exporting goods to the rest of the world, including Switzerland, Norway, Iceland and Liechtenstein. It says retailers can choose between making the declarations themselves  – although it does warn “completing a customs declaration is complicated and you may need software” – or hire a courier, freight forwarder or customs agent to do so on their behalf. 

For ecommerce retailers sending parcels abroad via the post, the UK government website currently advises that there is no need for a customs declaration when sending packages to a country within the EU, although there is when sending outside the EU. However, The Post Office website says: ”In the event of the UK leaving the EU without a deal, we expect the rules which apply to non-EU countries to be extended to EU countries, which means customs forms will be required for all countries outside the EU.” The relevant forms and guidance are here

What’s not yet known is whether customs tariffs will be changed on goods imported or exported from the EU. That depends on whether a free trade agreement is reached in the coming weeks. If a deal is reached, it will include details of any tariffs that are to be charged, but there may be none. If there is no deal, the government previously set out its UK Global Tariff – charged on imports – here. Retailers will need to check export tariffs for the individual countries they deliver to. 

Retail group JD Sports said in its half-year results, published last month: “We are very conscious that the UK’s transition period with the EU ends at the end of this year and, at this stage, there is a significant risk that the UK may exit that transition period with either no agreement or perhaps just a very basic and limited free trade agreement.

“Given the current status of our supply chain in Europe and the fact that 90% of our stock is purchased from international brands on a full landed cost basis, where we have no visibility of the original factory cost, there is some risk of duties being payable for goods which transit to/from countries in the EU. We are currently looking at options to mitigate some of this in the short-term whilst we establish a more permanent European supply chain infrastructure.”

Such mitigations might include inward processing relief, which allows importers to delay or pay less duty on goods that are imported in order to process, repair, store or use only temporarily.  

In the BRC’s Are you prepared for the end of the transition period? podcast, released today, Caroline Barraclough, global trade partner at Deloitte, says despite the lack of a final EU trade agreement, it is now time to take action. “We’ve had a lot of clients taking that wait and see approach with mitigations such as customs warehousing and inward processing relief and I think it’s just time to act now,” she says. “Some of these things aren’t resolved but actually now in terms of business risk it’s about taking some of those actions and perhaps being bold just in case that free trade agreement isn’t there or depending what the terms of the free trade agreement might look like for your business and the products you are moving.”

Warehousing options

Retailers may choose to use bonded customs warehouses. Using these, they can deliver large volumes of goods into the warehouses without paying any tariffs. Tariffs then only become payable when an item is shipped out of them. “If you have a large amount of stock coming in, you take out as much as you need each time, whether it’s staying in GB or going over to the Republic or going over to the Netherlands,” says William Bain, policy advisor and Brexit specialist at the British Retail Consortium. “You can do that, but of course, if we get no deal and basically there are tariffs – 12% tariffs on the import of clothing from Britain going into the EU – then you have a chargeable event once clothes come out of a customs warehouse and you send them to the Netherlands. The same would be true the other way, if it’s no deal.” The bottom line, he says, is that “a customs warehouse does not get you out of eventually having to pay tariffs on goods you may want to move out of a distribution hub in Great Britain to the whole of Europe.” Rather, he says, taxes would be payable at the point that they are sent out. 

Retailers can also choose to use a non-bonded warehouse to stockpile goods in the market they want to sell them in ahead of the end of the transition date. Many did so ahead of last year’s potential end of October departure from the customs union. However, says Bain, retailers may not be well-placed to do that again, since the coronavirus pandemic has depleted resources. “Many retailers would not have the capacity to engage in the level of stockpiling they did in 2019,” he says. “They don’t have the cashflow to do that so there is a real picture emerging that there will be much less stockpiling going on than was the case prior to the autumn of 2019.” He adds: “Stockpiling is not something we advise retailers to do – it’s based on a whole range of commercial decisions that are unique to those companies. But I think it’s fair to say that across British industry there will be less stockpiling occurring this time than there was with the various deadlines in 2019.”

JD Sports has set up a small 80,000 sq ft Belgian warehouse to handle product destined for some European shops. The retail group said in half-year results published in September 2020 that the site did not handle all of its European stock or fulfil stock for online purchases, but it is using the site to learn about how it will operate “a longer-term, more permanent European supply chain strategy”.

Logistics planning

Recent headlines suggested that there would be queues of up to 7,000 lorries at Dover in January in a worst-case scenario. Additionally, the Smart Freight System designed for hauliers to use is not ready, and, in the event of a no deal, hauliers may not have the permits they need to make the crossing. It seems highly likely, therefore, that retailers should now be planning for delays at Dover. The BRC’s William Bain says that while those shipping food and medicine may need to use these ‘short straits’, those selling clothing can use different entry points.

Fashion to homewares retailer Next, for example, has responded by ensuring that its consignments use different routes and ports into the UK. “We have relatively little of our stock arriving or leaving the UK via the Dover-Calais route and as a precaution we have already taken measures to move most of that traffic to alternative ports or airports,” it said in an overview of its preparations ahead of a potential no-deal Brexit preparations, published in its 2019 half-year results and which the retailer has said remains current this year.

Find out more

UK government guidance on exporting from Great Britain from January 2021

BRC Podcast: are you prepared for the end of the transition period? 

Logistics UK’s Brexit information centre 

InternetRetailing on what practical steps Top500 retailers are taking

InternetRetailing on preparing for Brexit Part 1 handling VAT – includes information on EORI numbers

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