Brexit Brexit-image-680x365_c

Published on January 9th, 2018 | by Nick Fitzgerald

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Brokexit – Brokering Brexit and Finding Working Solutions

CILT examine the remedies companies can use post Brexit and how they can
adapt and implement these. Here we explore some of the possible solutions
open to Irish industries from the perspective of a number of stakeholders
CILT have worked with collaboratively in recent times.

TIR – Transports Internationaux Routiers
Since 1949, the TIR System has been one of the road
transport industry’s most successful innovations – making
customs procedures and international border crossings quick
and simple.

The purpose of the TIR system is to facilitate, to the greatest
possible extent, the movement of goods in international
trade while effectively protecting the revenue of each state
through which such goods are carried. The TIR system
contains four basic requirements:

• Goods should travel in secure vehicles or containers;
• Duties and taxes at risk throughout the journey must be
covered by an internationally valid guarantee;
• Goods should be accompanied by a TIR Carnet initiated
in the country of departure, which serves as a control
document in the countries of departure, transit and
destination;
• Customs control measures taken in the country of
departure should be accepted by Customs in the
countries of transit and destination; and controlled
access to the TIR procedure for national associations to
issue TIR Carnets and for natural and legal persons to
utilise TIR Carnets.

The system provides for the movement of goods, under
Customs seal, in approved road vehicles or containers, across
one or more frontiers. It is a condition of the system that
some portion of the journey between the beginning and end
of the TIR operation is made by road. Where a road vehicle is
used, TIR plates must be displayed on the vehicle during the
TIR operation. Where a container is used it must have a TIR
approval plate permanently affixed. The goods are listed in a
TIR Carnet consisting of a series of vouchers and counterfoils
(volets and souches), which will be used at the different
stages of a TIR operation. The potential duties and taxes on
the goods are guaranteed by the guaranteeing associations
of the countries involved in the TIR operation.
Each national guaranteeing association is affiliated to an
international organisation i.e. the International Road
Transport Union (IRU) Geneva, Switzerland.

tir_liner_03_high-res

eTIR
The eTIR initiative is taking this innovation a step further and
with the advent of blockchain technology will make the
system one of the strongest contenders for the post-Brexit
customs relationship with the UK. The move to a paperless
system gives real-time data availability, online monitoring,
improved reliability and flexible guarantees. The global
industry association for road transport, the IRU is working on
an eTIR pilot project in collaboration with the United Nations
Economic Commission for Europe (UNECE). The Turkish and
the Iranian governments have tested the eTIR System along
one transport corridor, crossing the border from Turkey to
Iran and involving four customs offices. Today, having
successfully demonstrated 100% reliability, these procedures
are being extended to further customs offices and transport
operators. The pilot shows how the system offers tools to rely
exclusively on electronic messages from all communications.

“At the moment TIR may or may not prove to be useful in the
concept of customs post Brexit,” says Phonsey Croke of Croke
Consulting, a Customs expert. “It depends on the outcome of
the trade related talks between the EU and the UK which are
likely to commence late 2017 and early 2018.” “The one clear
way of minimising this is to make use of customs
simplifications which are currently in the Union Customs
Code. This assumes that the UK will mirror such
simplifications in their upcoming customs legislation. The
way to avail of these simplifications is to become a certified
Authorised Economic Operator. “ However, he points out, this
has its own challenges for Irish companies since today most
are not involved in customs business at all. In addition, he
says, it will not be enough for the transport service providers
to become AEO certified. “The principals (manufacturers/
exporters etc.) must also be certified. The principals will need
the AEO certification more so than the transport providers.”

micro4

Phonsey Croke, Croke Consultants

Authorised Economic Operator
In essence the AEO is an internationally recognised quality
mark, which indicates that the role of qualifying businesses
involved in the international supply chain is secure and that
their customs controls and procedures are compliant. After
11th September 2001, in order to reduce the risk of such
threats, the World Customs Organisation (WCO) devised a
system for increasing security of the supply chain. These new
security measures such as advance cargo information and
more robust risk analysis systems had the potential to slow
down the movement of goods through borders. In order to
lessen this slowdown, the concept of AEO was introduced by
the WCO. The EU adopted a similar programme shortly
afterwards.

Becoming AEO certified requires implementation of a
comprehensive customs compliance programme within a
business. This will provide assurance to the business that its
customs procedures and practices are up to standard.
Companies will be cleared through customs with the
minimum of formality removing any potential for delays as a
result of the physical searching of containers and so on.
Getting AEO certification should position a business well in
light of the fact that customs simplifications are now
exclusively available for AEO certified entities. These
simplifications will, among other things, only require the
submission of one customs report per month in respect of all
transactions for that month – reducing overhead compliance
costs and helping to create a seamless border.

Mutual recognition between AEO programmes involves a
country’s government formally recognising the AEO
programme of another country’s government, and thereby
granting benefits to the AEOs of that country. These AEO
programmes will really show benefits for all of those involved
in imports and exports once mutual recognition is achieved
between AEO programmes globally.

The first mutual recognition agreement was completed
between the United States and New Zealand in June 2007. A
similar agreement has been concluded between the EU and
Japan. Canada and Russia are currently in discussions with
the EU about mutual recognition as well.

Following Brexit, the UK and EU will likely agree to an AEO
recognition agreement between each other providing trade
facilitation measures for AEO certified businesses both in the
UK and in the EU. Non-AEO businesses will not benefit. There
are two stages in the application process to become AEO
Certified as follows:

1. The application
2. The evaluation

The time frame for the completion of the package of
documents associated with the applications to the point of
submission would normally be in the region of three months.
The evaluations can take up to four months to complete. That
is the time limit customs have by law to complete the
assessment phases and to make the decisions. Usually there
are three or four site visits made by customs officials to
evaluate applications.

AEO and the Union Customs Code (UCC)
Changes brought about by the Union Customs Code (UCC),
introduced across the EU in May 2016, aim to achieve greater
legal certainty for businesses and also increased clarity for
customs officials. “It seeks to improve and simplify customs
rules and procedures,” says Conor Anderson of Analytiqa, a
business intelligence consultancy specialising in supply
chain. “It also looks to further harmonise decision-making
procedures and lead to more efficient customs transactions.
Some of the key amendments include changes to the areas
of centralised clearance, self-assessment, penalties, and
decisions relating to binding information and valuation.
Amongst the fundamental changes is the introduction of
mandatory guarantees for customs procedures, which could
increase operating costs for trading businesses and
significantly affect cash flows. Businesses with AEO status will
be able to obtain guarantee waivers or guarantee reductions
of up to 100% on any bond guarantees or bank guarantees
they currently have with customs.”

UCC

Why should I apply for AEO accreditation?
The broad objective of AEO accreditation is that
organisations that achieve AEO status will be given benefits
that will lessen the impact of increasingly tighter and more
restrictive security measures in the supply chain, compared
to non-AEO accredited businesses. Used effectively as part of
a marketing and communications strategy, AEO accreditation
is a highly valuable differentiator that sets an organisation
apart from its competitors. Additionally, benefits of achieving
AEO accreditation include:

• Provides a logistics service provider the ability to
respond to increasing numbers of tenders from
International companies that require AEO specification;
• Facilitates greater efficiency of processes within local
operations, improving lead times;
• Subject to less physical inspection and document checks
by customs and organisations gain priority in times of
heightened security, strikes or other supply chain
disturbances;
• Encourages the effective management of, and reduction
in, the risk of theft, counterfeiting, contamination or grey
market shipments;
• Improved delivery times, customer satisfaction and
client retention;

AEO status brings with it the ability to apply for a single
community authorisation to use simplified declaration
procedures across the EU and the ability to apply for a special
procedures authorisation involving more than one Member
State.

Education is Key
“As a consequence of Brexit,” says Aidan Flynn of the Freight
Transport Association (FTA), “the supply chain is being forced
to review and rethink how goods can get to the market,
principally due to the hard line position the UK have taken at
the time of writing. Managing change is a daunting prospect
as it requires, time, clear guidelines, ‘buy in’ from employees,
collaboration and commitment from all. We all want to know,
what can be done now in preparing for Brexit Day? The
common answer at the moment is nothing! Or will we wait
and see how the negotiations go? Is this sensible?” he asks.
“Should you in the first instance, review your business and
determine how exposed and reliant you are on business to
and from the UK/ Northern Ireland market? Would it not be
sensible to start this conversation with your clients, suppliers,
haulage contractors, freight forwarders, shippers?”

A rules-based trading environment
Over the past 20 years or so the ‘just-in-time’ principle of
distribution of goods has established itself as meeting the
demands of the market. This has been facilitated by
membership of the Customs Union and the single market.
If one or the other is removed there will be ‘friction’ at
borders, customs checks and delays, administrative burdens
and red tape. It is increasingly likely that the UK will not be
part of the Customs Union or the single market post-Brexit.
The white papers published by the UK on Ireland, Customs &
Trade detail their proposed thinking on future trading and
customs arrangements with Ireland and the EU. They want to
pursue a ‘rules based trading environment’ as they believe
this will ‘enable economic and security cooperation,
encourage predictable behaviour by states and the peaceful
settlement of disputes’. To do this they hint that possible
solutions would be the adaption of schemes such as the
Approved Economic Operator (AEO) programme which will
be vital to ensure a ‘trusted trader’ scheme that will result in
minimum levels of friction and delays at borders.

For this to work in the context of Ireland-UK trade, all in the
supply chain must participate in it at some level to achieve
the ‘trusted trader’ outcome to satisfy the principal. “This will
be a very optimistic task,” argues Aidan Flynn. “If a transition
period is not agreed – AEO accreditation takes time to
achieve, up to six months and often longer, and to date there
are just over 130 companies in Ireland registered to the
scheme. For a pure workable ‘trusted trader regime’ to be
viable all in the supply chain must be active and willing
participants, and there will need to be mutual recognition of
the scheme between the UK and the EU. Reality is beginning
to bite, collaboration within the supply chain to develop
industry wide solutions and prepare for change are vitally
important.” “There is an opportunity for the Irish Transport
and Logistics sector to grab the initiative and pre-empt the
inevitable, that is, start preparing for a future that will require
more transparency around the driver, vehicle, load, pickup
and delivery locations etc. Doing this will at the very least
ensure you are operating to the highest standards of
professionalism and compliance and that this is
demonstrated through attainment of independent standards
that are periodically audited. This is part of what ‘trusted
trader’ is all about, another part is that the supply chain is
linked together in terms of the rules and requirements for
doing business.”

The unfortunate reality of Brexit is that there are a plethora of
new processes and terminology that most in the industry
were vaguely aware of but now must fundamentally
understand, study and implement. “For solutions and
responses to be effective,” says Aidan, “both industry and
Government must work together to make sure the issues are
understood and that solutions such as resourcing of new
skills and new systems are planned for. They must be all
inclusive and give everyone a fair chance to trade within the
new rules. AEO could very well be part of a solution and must
be considered. What can be done now is distributors can
review and audit their current levels of operational
compliance to roadworthiness issues, tachograph and driver
hours. Manufacturers can review the impact WTO rates will
have on their product, they can also review where they are
exporting or importing from and shippers can work with
both to make sure everyone is on the same page and
planning to have the least disruption to accessing vital
markets on time.”

Every link in the supply chain must work collaboratively to
develop strategies to prepare for Brexit Day. Most
importantly companies should be preparing case studies of
the impact Brexit will have on their businesses and sharing
this information with trade associations, representative
bodies, Government officials, local politicians and EU
representatives.

“Time is moving on,” says Aidan Flynn, “and one wonders if
the significance of the deadline date is really sinking in with
industry. It is vitally important that there is a clear
understanding of the nature of the exposure on businesses
and jobs for our industry now.”

Aidan Flynn (5)

Aidan Flynn, FTA

Invest in Education
The transport and logistics sector currently faces a serious
skills shortage across all levels which hinders progress and
makes dealing with change extremely difficult. A real way to
deal with change is to invest in training and education. Even
without Brexit investment in training and education is
urgently required. There are some key issues the industry
needs to confront so that it is better prepared. Why is there is
a skills shortage in the first place? The industry is on the
verge of the biggest shock to the supply chain in decades
and on the cusp of an automated revolution. Getting people
interested in a career in transport and logistics is of vital
importance and should be actioned straight away. Training
and education, up-skilling and continuous professional
development must become the norm, not the exception.
Industry must really commit to adding value to careers in
their companies and making them more attractive to young
people. There are a number of existing initiatives available
now that can make a real difference in future proofing your
business. Support Apprenticeship programmes (which must
be industry led) by matching employees into positions that
fit in with available apprenticeships. If they are not there yet
share your requirements with the likes of the CILT or FTAI or
other associations and review options.

Apprenticeships are ideal for our sector and a viable solution
to help add value and direction for the participant.
Apprenticeships help form a culture of progression within
industry that will ultimately result in a better skilled
workforce.

Training and education obviously costs money but industry
should concentrate on the return on investment such as
improved productivity, employee loyalty, happier employees
and improved efficiencies to name a few. Government are
already providing training subsidies through the likes of the
Skillnets programmes run by the CILT for the transport and
logistics sector. Support it, make the most of the funding that
is available. The harsh reality at the moment is that the
transport and logistics sector are not exploiting what is
available. Skillnets is a great opportunity to avail of 20%
saving on the cost of training that your business needs to be
doing anyway. Some examples of roles that will benefit from
a renewed focus on training and education are:

• Blockchain technology applications for the supply
chain sector
• Customs and excise
• Automated picking of orders
• Platooning leading to driverless solutions
• More integrated warehousing and distribution solutions

Brexit will require all sorts of new skills as will digital data
management and automation solutions, all of which will
obviously require up-skilling. Start now, develop your
training and development plan for 2018, remember Skillnets
and the soon to be announced new apprenticeship
programmes.

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