Bureaucracy stymies post-Brexit customs prep

Bureaucracy stymies post-Brexit customs prep

The UK is the port of Antwerp's second-largest trading partner, and customs issues are emerging as one of the most likely sources of disruption in a no-deal Brexit. Picture credit: Port of Antwerp

Until just a few weeks ago, customs organizations in Europe were prohibited by Brussels from contacting their British counterparts, preventing them from jointly preparing for a no-deal Brexit after March 29 that will require customs formalities that neither side has been required to perform for decades.

Despite the UK being Antwerp’s second-largest maritime trading partner with 16 million tons of cargo a year transported across the English Channel, the only way Belgian Customs could communicate with Her Majesty’s Revenue and Customs (HMRC) was indirectly through meetings with UK businesses, according to Werner Rens, advisor general of Belgium’s Public Service Finance department.

Port of Antwerp executives have held briefings in London and Birmingham to inform business, ports, and service providers on ways to handle the UK’s withdrawal from Europe, whether it is by an orderly transition over the next 21 months or an abrupt exit at midnight on March 29. Should the UK and the EU be unable to reach a deal before then, Britain will undergo what is known as a "hard Brexit" and immediately leave the EU, at the same time withdrawing from the European Customs Union after which all UK imports and exports will require customs inspection.

Shippers and forwarders on both sides of the Channel have been warning for months that even customs checks that can be measured in minutes will create huge bottlenecks at the ferry ports of Calais in France and Dover in the UK. The EU is Britain’s largest trading partner, accounting for 44 percent of its exports and 53 percent of all British imports.

More than 9 percent of the UK’s total exports to Europe in 2017 consisted of petroleum and petroleum products, and when a UK chemicals shipper using the port of Antwerp learned at the briefing of the complete lack of coordination between HMRC and Belgian Customs in the run up to what is widely expected to be a difficult post-Brexit period, he was astonished.

“It is a completely ridiculous situation,” the shipper told JOC.com. “My company ships chemicals between the UK and Europe and stores them at hubs in Rotterdam and Antwerp for distribution across the continent, so I need the customs arrangements to be as frictionless as possible. The fact that the two customs organizations have not been talking until recently is incredible.”

Rens explained that the inability for Belgian Customs to have direct talks with its UK counterpart was a directive that came down from Brussels.

“The EU negotiators wanted to keep control of the negotiations and not have agencies running parallel discussions with the UK, otherwise there could be agreements on specific items interfering with the overall discussions,” he told JOC.com.

One of the possibilities that could not be explored between the two customs authorities was to have UK officers performing inspections at the port of Antwerp, similar to the UK immigration officers stationed at the Eurostar rail service in Brussels.

Because of the communication limitations at agency level, Rens said contact with companies in the UK was an important reason for his presence on a port of Antwerp delegation. “I am talking to business in the UK to give them ideas on how companies are dealing with this in Belgium, and via them, conveying those ideas to HMRC,” he said.

But there is a lot to convey, and the message is difficult to get through, said Antwerp Port Authority CEO Jacques Vandermeiren. He said with just a few weeks to go, many businesses were still unprepared for the change in customs formalities that a hard Brexit would bring and were starting to panic on both sides of the Channel.

“There are more than 40,000 SMEs in Belgium that have been doing business with the UK for the last 40 years and more [Britain joined the EU in 1973], but many have never experienced any of the third-country difficulties they will discover once the UK is out of Europe,” he said.

“For many months these businesses have been hoping for the best and not really preparing for the worst, and we have seen since November that there is a panic among these small companies about Brexit. There are lots of operational things to do and this is new, it is a burden, and they have postponed dealing with it.”

Belgian Customs has been working to promote awareness of the new measures that will be in place once Britain is outside the EU, but Rens said reaching the thousands of SMEs has been a difficult task.

“There is a huge difference between the big companies and the SMEs,” he pointed out. “The bigger companies have been preparing for Brexit for 18 months already. But of that 40,000, more than 20,000 companies in Belgium are not used to trading with third countries.

“So how do you create awareness among these small companies? That is a major difficulty. You can’t reach them even by working with chambers of commerce and the trade federations. We sent direct mail to 20,000 companies in Belgium warning them that they need to request an Economic Operator Registration Identification (EORI), a customs number without which they are not allowed to import or export from a third country, which will include the UK after Brexit.”

However, Rens said even after being contacted by customs, most of the companies still did not apply for the EORI number, so Belgian Customs decided to create a number for each company and mail it to them.

“We then set up a call centre and during those calls to thousands of companies we also learned what type of business they were involved in. A lot of the companies had not applied for their customs number because they did not even know they were involved in trade with the UK.

“The reason is e-commerce. There is no border between the 28 member states, so when a small company buys supplies via an e-portal and they come from a country within the EU, there is no need for any customs formalities. Companies could be importing from the UK without realizing it, and after Brexit when they have no EORI number, their shipments will be blocked.”

Both Belgium and the UK are struggling to fill the customs positions that will be required to handle inspections in the event of a no-deal Brexit. Belgium has identified a need for an additional 385 officers and the UK will need around 1,000 more people. Training of officers is a year-long process, but Belgium Customs have developed a two-month short-cut Brexit training programme. Not helping the recruitment process is the uncertainty over whether the UK will negotiate a deal or leave the EU without one. In the event of a deal and an orderly withdrawal over the next 21 months, many of the new customs officer positions could end before they begin.

Another bizarre situation for UK or European shippers emerged at the Antwerp briefing. A consignment sent across the English Channel on March 29 will not require customs checks, but if it arrives at destination after midnight and after a no-deal Brexit, the goods will, in theory, not be accepted.

“My advice to businesses is to not ship anything over that weekend. That is the best possible way to avoid this horrible situation,” Rens said.

The physical movement of cargo is facing even bigger issues that will extend long after the Brexit weekend, with a key pain point identified in the UK-Europe supply chain as the Calais-Dover trade corridor. This route handles 75 percent of all roll-on, roll-off (ro-ro) freight arriving by ferry from Europe every year, or more than 4 million accompanied trucking units, i.e., truck, trailer, and driver. An estimated 14,000 trucks cross the UK-EU border every day, and 53 percent of UK imports originate in Europe, with the port of Dover handling 17 percent of the UK total trade in goods.

As a member of the EU, goods can travel freely between the island and the continent. However, if no free-trade deal is negotiated with the EU before March 29 — which is now impossible as trade deals take months and even years to thrash out — the UK will fall outside the Customs Union and all cargo transported in and out will need to undergo inspections.

There are fears in the UK from forwarders, shippers, and ferry operators that any delay caused by the customs checks will quickly lead to extensive bottlenecks and disruption.

Vandermeiren said this was a key concern his delegation was hearing from companies in the UK and Europe that were showing a keen interest in hearing about alternatives to the accompanied ro-ro model via Dover, such as shifting from ferry to short-sea container shipping with services from Antwerp to smaller ports around the UK.

Europe’s largest port, Rotterdam, has also been trying to get a message across to port users that whatever form the UK’s exit from the European Union takes, either a hard or soft Brexit, shippers and forwarders should understand that all cargo traveling by short sea or ferry between the continent and the UK will be facing customs inspections.

Rotterdam noted in a Brexit update that in the event of no deal, it would require customs formalities to begin immediately after March 29. But Rotterdam emphasized in its ‘Get Ready for Brexit’ update that even in the event of a soft Brexit, those customs requirements were a given in the near future.

“Preparing our logistics chain for this now will enable all cargo to travel through Dutch ports quickly, even after Brexit. If we don’t do this, we’ll all come to a standstill after Brexit,” was the stark warning from Steven Lak of port entrepreneur association Deltalinqs.

Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler.

 





Comments

Even as someone who likes to be prepared, it is mind-boggling the amount of work we're going through to prepare for something that may not actually happen (though, it looks more and more every day like the worst will occur). We're waiting on our European colleagues to give us the go-ahead to execute changes for shipping out of our non-European manufacturing plants into Europe, as we currently use the Netherlands as a touch-down country before moving work-in-progress goods to plants all over Europe, including the UK.

It is an insane situation. And you are one of the lucky shippers that has the customs numbers and the experience of shipping goods internationally. Spare a thought for the tens of thousands of SMEs that have only traded within the EU and now need to somehow get up to speed with all the customs formalities required for international import and export. They are going to be facing some tough times soon.