The Power of IT may smooth BREXIT

Whilst it is unclear what sort of trading relationship Britain will have with the EU following its decision to leave, it appears that the processes around UK customs will change significantly. The likelihood is that the UK will withdraw from the European Union Customs Union, itself a sign that Britain wishes to reposition itself within the global trading system.

The EU Customs Union is essentially an agreement between the countries of the EU to unify both the levying of tariffs and their administration. What will be the implications of withdrawing from this system for freight forwarders and other logistics companies moving cargo in and out of the UK? Possibly not too bad. The good news is that the UK appears to have a flexible bureaucracy for managing its customs. Freight forwarders looking to import goods into the UK operate within a dedicated IT system. Her Majesty’s Revenue and Customs has a centralised information network that both manages the authorisation of specific consignments and accepts the payment of any tariffs on those consignments. Accessing this system requires specific software which is available to any accredited LSP (logistics service provider), however little more than that is needed. The data demanded by this system is largely available on the bills of lading, waybills or consignment notes.

The details of the tariffs to be paid on any consignment are laid out on a related website, the ‘UK Trade Tariff’. This outlines which imports must pay which tariffs. It is integrated into the wider customs site, illustrating that Britain has an adaptable system for administering imports into the country. Changing such a system ought to be very straightforward.

Similarly, the nature of data interchange between the UK and the economies of the EU should not be so demanding. The EU ‘TRACE’ system or ‘Excise Movement and Control System’ are means of tracking movements of consignments for purposes of levying taxes or monitoring the routing of goods. Their duplication outside the EU, if needed, would be straightforward using the existing Revenue and Customs systems. 

What may well be a significant cost is any change to the status of the ‘rules of origin’. This concept regulates the content of a specific item, with sub-components that have been imported from outside the EU having a tariff levied on them when the whole product is moved outside the UK. This can be a complex process and its impact could vary according to the nature of trading agreements between the EU and the UK. The think-tank Open Europe suggests that applying ‘rules of origin’ could cost around 0.9% of GDP over a 10-15 year period. The means of how these rules will be applied will be a major issue to any exporter and importer.

Although there is substantial uncertainty concerning the nature of the trading relationship between Britain and the EU, the impact of the withdrawal from the EU on freight forwarders and other LSPs day-to-day operations may not be that significant, due largely to the efficiency of the UK customs IT systems. What is less certain is the wider supply chain administration requirements, although these look to be far from onerous.

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Source: Transport Intelligence, August 16, 2016

Author: Thomas Cullen