Rudee Bertie gives his take on the uncertainties of Britain’s proposed exit from the EU
As we begin a new calendar year, one thing IS certain – that in 2017 a great deal of time and attention, both in Government/politics and the media, will be devoted to BREXIT. Many people are concerned about what Brexit will mean to our industry. The details will take some time to emerge, which means we will all need to live with a degree of uncertainty over the coming months. But I don’t believe that’s a reason to worry. Here’s why:
I’ve worked in freight forwarding and customs broking since the early 80’s – since a time when the UK was in Europe, but outside the Eurozone. When I started in the industry, every single movement, import or export, required customs entries, and that meant paperwork, a lot of it. To facilitate trade into Europe, we made alliances with brokers across the region, and we would do trans-shipments. That meant goods would be imported into the UK from, for example, China or the USA, just as they are today. We would then handle trans-shipment to, for example, Paris. Then once the goods arrived in Paris, they would be cleared and into free circulation within that particular country or jurisdiction.
There’s no reason to believe we couldn’t operate in much the same way today, if it came to it. But… I don’t believe it will. We need to think logically about this, and not panic. To me, it’s inconceivable that the Government, with all its negotiating power, will allow the logistics industry to be disadvantaged, or will create a situation where it’s tougher for us to trade with the rest of Europe. I believe we will negotiate trade agreements which will keep us in much the same position as we are in currently with the Eurozone.
Another reason I feel optimistic is the ongoing shift towards digital. Everything is going electronic, giving greater and more instant visibility. Where in the past we would produce physical documents which had to be stamped at one point and endorsed on arrival at another, today everything is on-line. Again, I don’t see that the Government will take a retrograde step here – electronic transit is the future. If things get more complicated, or more expensive, trade will fall away, and nobody wants to be responsible for that.
One thing I think we will see is a raising of the low value threshold for duty/vat. The USA have already done this, raising their low value threshold from US$200 to US$800. At US$200, too many people were under-declaring to avoid having to pay, and essentially smuggling their goods into the country. In this scenario the authorities can’t possibly keep up with the level of system abuse; it costs resource to hunt down a few of the culprits and tax revenue from the many isn’t being collected. It makes more sense to raise the threshold, allowing the low value importers to bring in their goods legitimately. This increases the volume of goods available for sale, as those importers are no longer under risk of penalty, and those goods in turn attract sales tax. The Government may not be getting tax on the importation, but they’ll get it at the point of sale.
If a country wants to develop its import/export trade, it must make it easy for the traders to do business – at every point in the logistics chain. I believe that if our Government is smart, they will increase the low value threshold from £15 to anywhere between £150 and £300. We know vast numbers of shipments are coming into the UK without paying duty and vat – perhaps hundreds of thousands, every day. The authorities would be better off accepting the situation, raising the threshold, and freeing themselves to focus instead on higher value smuggling. In my view though, this would only be possible if the UK leaves the single market and is therefore outside the UCC (Union Customs Code).
How will this impact freight forwarders?
Forwarders need to start thinking outside-the-box. They will need to align with agents across Europe. It will be more costly in administrative terms for forwarders to deliver into Europe, but with electronic processing, assuming this remains in place, the impact should be minimal.
As a long-established customs broker, CCL can handle trans-shipments with its clearance partners across Europe, and our customers, the freight forwarders, won’t see any of it, or notice any difference. We’re part of worldwide logistics organisation, the Lenton Group, and we’re a member of many global logistics networking organisations. Through this extensive network, we have access to clearance partners in every country. The cost adjustments will be small, and it will be just as convenient for the forwarder, because CCL will handle every aspect of trans-shipment and clearance, just as before.
Every forwarder needs to work out what they need for themselves. Some already have offices across Europe, others do not. Some may decide to close down their UK operations or modify their strategies. As the negotiations play out, it will become clearer what each company needs to do. What the Government must ensure is that Britain retains its trading advantage – and it can do this through things like uplifting the duty/vat low value threshold.
Will the UK grow stronger ties outside the Eurozone?
Yes, I believe so, especially if we increase the low value threshold. We may end up outside the Eurozone, but we’re still in Europe. And we’ll have the ability to make our own laws, raise our own threshold, simplify our own import/export processes. We’ll be able to create our own beneficial trading arrangements with other countries – some enormous markets for our goods – such as the USA.
The world is changing fast and new trading opportunities are opening up all the time – for the rest of Europe and Britain alike. Who in the past would have foreseen the growth in trade with Eastern Europe or China, for example? And today new markets are still opening up – like Cuba. These may be uncertain times, but one thing is certain – in the global market, there are always opportunities.