Blog & Press Releases
Posted 13 December 2018 | | 0 Comments
As you are aware, the UK Government is seeking support from its EU counterparts in a last-ditch attempt to secure a deal through Parliament. Most commentators think this will fail, meaning that there is now a high probability that the UK is heading for a No-Deal Brexit. Given this risk, it is imperative that Procurement functions prepare as best they can for a prolonged period of uncertainty and supply chain disruption.
As procurement and supply chain specialists, Buying Support Agency Ltd has audited countless clients’ procurement functions across many industry sectors since 2002. Yet worryingly, recent surveys show that, for the majority of UK businesses, there has been limited risk planning for a No-Deal Brexit. Even for those businesses that are preparing supply chain risk assessments, lack of internal resource means that only the most immediate (‘tier 1’) suppliers are likely to be included. This may give a false picture of the total risks – particularly if UK or non-EU based tier 1 suppliers are being reviewed.
Brexit is only one of several growing risks where exposure could bring severe economic and reputational damage, however. Other risks include cyber security, GDPR, financial risks and the need for extended legal compliance around stricter anti-slavery and anti-bribery legislation.
Buying Support Agency Ltd offers a solution to this challenge: We can provide independent, expert resources to provide detailed risk planning across a thorough breadth and depth of the entire Supply Chain using our tested approach and methodology. Our output provides our clients with a much clearer understanding of risk exposure through their extended supply chains.
In a world of change, the potential consequences of inadequate risk management are severe. For a no-obligation discussion, please call us on 01242 506970 today.
by Matt Roper | 13 December 2018
Posted 19 November 2018 | | 0 Comments
As I write this article, Prime Minister Theresa May has received the resignations of two of her cabinet less than 24 hours after having announced the joint UK-EU agreement of a draft Brexit deal. Thus it appears that the risk of a 'no deal' remains, with only a few short months remaining before the UK officially leaves the EU at the end of March 2019. Such uncertainty is hitting UK manufacturing and engineering sectors hard, hampering investment decisions and damaging staff morale.
It should be born in mind that typically 50-70% of manufacturing costs reside in their supply chains, and in 2017 £258 billion worth of goods were imported by the UK from the EU. That's why preparing for all Brexit outcomes to mitigate supply chain risks is business critical. How well prepared is your manufacturing business and how aware are you of how the different Brexit outcomes could affect your supply chains? What are the likely risks and what should be done to mitigate them?
UK Manufacturers fear the consequences of a hard Brexit; they fear the loss of client orders - a recent manufacturing sector survey conducted by Sheffield Hallam University found that 83% of UK manufacturers have confirmed they're preparing for a hard Brexit by seeking new trading relationships outside of the EU as they fear a decline in orders from over the Channel. Other impacts highlighted by manufacturers include the 20% who predict further budget tightening; 21% predict increased trade tariffs on goods imported and exported; 18% showed concern with the possible divergence in standards and legislation. And non-trade barriers such as border checks and additional admin/time to process imports and exports, together with general supply-chain disruption, are identified by 18% of those surveyed.
So let's consider the range of supply chain risks coming out of Brexit. Whilst arguably the greatest threats relate to food retail, technology and automotive sectors, most of these risks will impact on all manufacturing and engineering sectors.
1. Tariffs - the key to this is the EU 'rules of origin' for goods and services. Any product currently with 55% or more of its make up being of EU origin is deemed to be EU sourced and therefore carries zero rated tariff for EU based manufacturers. Should the UK fall out of the customs union and single market, this arrangement will be under threat. For example, the Dutch government has advised Dutch manufacturers to avoid UK components for fear that post Brexit, including UK components (legally outside of the EU) could bring their finished products below the magic 55% level. In such cases, if EU manufacturers continue to rely on UK suppliers, their finished products may no longer qualify for free trade and so will incur significant additional costs. And for UK manufacturers who send parts over to the EU for processing, because less than 55% of their origin comes from the UK, they will struggle to qualify for free trade with non-EU export countries even if the UK can mirror EU trade agreements with these countries. So they will struggle to compete on price with their foreign competitors.
2. Exchange Rates - sterling has fallen by over 20% since the Referendum result. Manufacturers should consider hedging to mitigate further currency fluctuations as import prices increase in real terms (though exports become more competitive). Procurement must assess the likely import price fluctuations and consider changing the currency in contract terms with overseas suppliers.
3. Lead times & administration burden - there has been much talk about the likelihood of congestion at UK ports and nearby roads and how this might create serious headaches for those manufacturing companies who rely on frictionless trading for their Just in Time supply. Dr Ke Han of Imperial College, London, forecasts 30-minute queues at Dover and Folkestone if there are just 4-minute checks. Supply chain and logistics managers at UK manufacturing companies must seek to understand from discussions with HMRC and their freight agents how bad such delays are likely to be, and what plans are being made to reduce these delays. Are you clear which UK ports and ferry routes are being used when importing from the EU? And are you prepared for the additional import/export clearance administration? Are your systems and staff ready for a sudden increase in customs declarations? And are you involving your supply chains in preparing for these challenges?
4. Contracts - the impact on legal contracts must be considered in good time, based on the different Brexit scenarios. Clearly there are challenges here - in a recent Chartered Institute of Purchasing & Supply (CIPS) survey, 20% of UK businesses were struggling to secure contracts that run until after March 2019. And 15% had postponed or cancelled contracts due to uncertainty. This highlights the need to evaluate all contracts to ensure post Brexit compliance, for example reflecting any legal or regulatory divergence.
Having considered the major risks facing your supply chains, how best to organise your preparation? I recommend that you map out the web of suppliers who serve your business.
This is not simply your immediate (tier one) suppliers, but tiers two and three as well. If you only consider direct tier one suppliers based in the UK, you will miss the potential risks being carried by these UK organisations should they have EU suppliers in turn. (nb: as procurement and supply chain specialists, Buying Support Agency Ltd can show you how to strategically map your in-bound and out-bound supply chains and then to develop appropriate mitigation strategies).
Should it be agreed that new (non-EU) overseas supplier relationships be explored as part of the strategic plan, you must research the possible new risks being introduced by such a move. For example, other markets have different regulatory regimes and trading with suppliers within those markets potentially increases the risks of non-compliance with UK and International law (e.g. bribery, corruption, child labour and slavery).
Summary - your supply chain plan for Brexit (and other external risks):
Adherence to the following guidelines should be considered when planning your approach to Brexit:
1. Define specific risks for your company and financial impact
2. Build a set of probable what-if scenarios and associated financial impact
3. Devise a set of strategic options
4. Develop a clear set of action trigger points - timing is key so you need to agree on when action will be taken, not just the options.
Brexit is not the only risk out there for the UK manufacturing sector; there's cyber security, increased automation as technological advances continue at pace, global trade wars, environmental climate change and political instability. With such a changeable external environment, strategic planning is crucial in giving your business the agility to adapt at the right time which will give you competitive advantage.
We can help resource your procurement and supply chain Brexit planning
Buying Support Agency Ltd (BSA) can help your manufacturing company to prepare its procurement and supply chain function for Brexit, typically as part of our independent procurement health check and risk assessment. And if resources are tight, one of our team of highly experienced senior procurement leaders in the manufacturing sector can work alongside you to develop supply chain strategies, facilitate complex tenders or provide top level guidance as you prepare your supply chains for Brexit.
We can offset our fees through your using BSA Buying Group - many manufacturing companies have used this cost reduction service, reducing utilities, packaging, freight, telecoms, workwear/PPE, travel and other overhead costs by up to 58% within six weeks.
If you need external procurement and supply chain support but want to avoid additional recruitment costs, please call 0800 254 0344.
For more procurement related information relating to Brexit we also recommend that you visit the CIPS (Chartered Institute of Procurement and Supply) website.
by Matt Roper | 19 November 2018
Posted 1 October 2018 | | 0 Comments
This second blog copies the HMRC guidance note re classification of goods for import/export should there be a no deal Brexit. The notice was published on 23rd August 2018.
In the event of “no deal”, goods traded between the UK and the EU after 23h on 29 March 2019 will be subject to the same requirements as third country goods, including the payment of duty. Under World Trade Organisation (WTO) rules, the principle of most-favoured-nation (MFN) treatment means that, unless a preferential agreement is in place, the same rate of duty, on the same good, must be charged to all WTO members equally.
For UK exports to the EU, the EU will require payment of customs duty at the rate under the EU’s CCT. For goods imported to the UK from the EU, the UK will require payment of customs duty at the rate set by the UK Government.
In preparing for “no deal” businesses will want to be aware of the following:
- the Taxation (Cross-Border Trade) Bill will provide the necessary powers for the UK to set its own tariff once it leaves the EU
- in a ‘no deal’ scenario, trade with the EU will be on non-preferential, WTO terms. This means that MFN tariffs and non-preferential rules of origin would apply to consignments between the UK and EU
- the EU will apply its MFN rates to goods imported into the EU from the UK. The EU MFN rates are set out in the CCT, where they are listed as “erga omnes” (which translates as “towards all”), rather than stating a specific country. The EU may change these rates between now and March 2019, but this provides an indication
- the UK will apply its MFN rates to goods imported into the UK from the EU. The government will determine and publish these new UK duty rates before we leave the EU. They may be different from the rates in the EU’s CCT
- the UK intends to continue offering unilateral preferences to developing countries, and to seek to transition all EU Free Trade Agreements for day 1 in order to ensure continuity for both goods imported to the UK, and for UK exports. Maintaining these benefits is of clear importance to businesses, consumers and investors, and will ensure a smooth transition for users of these provisions as we leave the EU. Further information on preferential trade under the UK’s existing trade agreements will be captured in the Trade Agreement Continuity technical notice
- the UK Trade Tariff, detailing the import duty rates and rules that will be applicable to each good, will be made available free on GOV.UK in the same way as now. Importers of goods into the UK will no longer use EU Tariff information published by the EU
- the UK does not intend to immediately change the classification of goods in a “no deal” scenario. The UK does not plan any immediate deviation from the current commodity code list published in the UK Trade Tariff, which is currently applied by the EU, except where necessary to maintain alignment with international standards, or for trade remedies purposes.
What you would need to do
Anyone importing goods into the UK from the EU, or exporting goods to the EU from the UK, will have to comply with customs procedures, where these were not previously necessary. As set out above, this includes the potential payment of duty on UK-EU trade.
Establishing A UK Trade Tariff
The Taxation (Cross-Border Trade) Bill provides the powers for HM Treasury to establish a new UK trade tariff.
The importer (or their agent) must use the guidance in the tariff to help decide the correct classification of their goods (although it should be noted that the guidance is not the legal text of the tariff). This will require knowledge of the item being classified, as well as its constituent parts: what it is made of, and the purpose for which it will be used. It will also be necessary to know where it originates from. The process of classification will result in a numeric commodity code. The commodity codes will be listed in the Tariff with the rate of import duty applicable to the goods falling within those codes (duty rates are shown either by formula or percentage of the customs value of the goods). The Tariff will contain rules for determining the amount of import duty applicable to those goods based on their description (the commodity code) and country of origin.
The Tariff will also set out import procedures such as how the value of a good is calculated, and which forms, codes, and procedures are to be used.
The UK Trade Tariff will replace the EU CCT for imports to the UK. HMRC already publishes tariff data online for use by UK traders with third countries. Those currently importing goods from third countries into the UK will be familiar with this system.
UK Commodity Codes
Commodity codes in the EU are 10 digits long for imports, and 8 digits long for exports.
Commodity codes are standardised under the World Customs Organisation’s Harmonised System for the first 6 digits of the code. The UK is, and will remain, a participating country in this system.
The Harmonised System allows additional digits to be set by Customs authorities. Tariff codes beyond 10 digits are used for some food products, to identify sugar, starch, and fat content, and for trade defence measures. The UK does not intend to immediately change any commodity codes, but the rules will be set out in new UK regulations rather than EU ones.
Classification - an example
I am seeking the commodity code for a grand piano. Searching for “grand piano” on the UK Trade tariff identifies the commodity code 9201200000 for imports (92012000 for exports).
The tariff has a hierarchical structure. The first two digits (92) are the “chapter”, and refers to Musical instruments; parts and accessories of such articles. The next two digits (01) are the “heading”, and identify pianos, including automatic pianos; harpsichords and other keyboard stringed instruments. The following two digits (20) are the “sub-heading”, and identify a grand piano.
Up to this level, the same digits are used internationally as part of the Harmonised System. Because no further distinction is required, the next two pairs of digits are each 00.
For a more detailed worked example, please see the classification section on the uktradeinfo website.
Trade Tariff: look up commodity codes, duty and VAT rates – this will replace the EU CCT for imports to the UK.
For business exporting to the EU, the EU publishes its tariff online TARIC, the integrated Tariff of the European Union. This is a multilingual database integrating all measures relating to EU customs tariff, commercial and agricultural legislation.
by M Roper | 1 October 2018
Posted 1 October 2018 | | 0 Comments
Here is a copy of the recent HMRC Guidance notice re trading with the EU if there is no Brexit deal. It was published on the Gov.UK website on 23rd August 2018.
Businesses importing from the EU in a 29 March 2019 ‘no deal’ scenario
After the UK leaves the EU, in the event of a ‘no deal’ scenario, businesses importing goods from the EU will be required to follow customs procedures in the same way that they currently do when importing goods from a country outside the EU. This means that for goods entering the UK from the EU an import declaration will be required, customs checks may be carried out and any customs duties must be paid.
Before importing goods from the EU, a business will need to:
- register for an UK Economic Operator Registration and Identification (EORI) number. Businesses do not need to do anything now. There will be further information available later in the year. For those businesses that sign up for the EU Email updates, they will be contacted when this service becomes available
- ensure their contracts and International Terms and Conditions of Service (INCOTERMS) reflect that they are now an importer
- consider how they will submit import declarations, including whether to engage a customs broker, freight forwarder or logistics provider (businesses that want to do this themselves will need to acquire the appropriate software and secure the necessary authorisations from HMRC). Engaging a customs broker or acquiring the appropriate software and authorisations form HMRC will come at a cost
- decide the correct classification and value of their goods and enter this on the customs declaration. To help classify the goods correctly, the following may be useful:
- HMRC publishes tariff information and guidance alongside the list of commodity codes needed to classify goods together with all the tariff rates, and measures
When importing goods from the EU, a business will need to:
- have a valid EORI number
- make sure that their carrier has submitted an Entry Summary Declaration at the appropriate time (see section 3)
- submit an import declaration to HMRC using their software, or get their customs broker, freight forwarder or logistics provider to do this for them
- pay Value Added Tax (VAT) and import duties including excise duty on excise goods unless the goods are entered into duty suspension (for example a customs or excise warehouse – a financial security will be required to cover the duty liability of the goods whilst they are being moved to the warehouse). Import VAT may also be due and more information regarding paying import VAT can be found in the ‘VAT for businesses if there’s no Brexit deal’ technical notice
- once excise goods leave a customs suspensive arrangement, they may be immediately entered into an excise duty suspension regime. A business will need to declare the goods on EMCS for onward movement via a Registered Consignor. Further information on how to do this can be found in Public Notice 197.
Businesses may also need to apply for an import licence or provide supporting documentation to import specific types of goods into the UK, or to meet the conditions of the relevant customs import procedure.
Businesses exporting to the EU in a 29 March 2019 ‘no deal’ scenario
After the UK leaves the EU, in the event of a ‘no deal’ scenario, businesses exporting goods to the EU will be required to follow customs procedures in the same way that they currently do when exporting goods to a non-EU country.
Before exporting goods to the EU, a business will need to:
- register for an UK EORI number. You do not need to take action now but you will want to familiarise yourself with this process
- ensure their contracts and International Terms and Conditions of Service (INCOTERMS) reflect that they are now an exporter
- consider how they will submit export declarations, including whether to engage a customs broker, freight forwarder or logistics provider (businesses that want to do this themselves will need to acquire the appropriate software and secure the necessary authorisations from HMRC). Engaging a customs broker or acquiring the appropriate software and authorisations from HMRC will come at a cost.
When exporting goods to the EU, a business will need to:
- have a valid EORI number
- submit an export declaration to HMRC using their software or on-line, or get their customs broker, freight forwarder, or logistics provider to do this for them. The export declaration may need to be lodged in advance so that permission to export is granted before the goods leave the UK (the export declaration also counts as an Exit Summary Declaration – see section 3)
- businesses may also need to apply for an export licence or provide supporting documentation to export specific types of goods from the UK, or to meet the conditions of the relevant customs export procedure.
When exporting duty suspended excise goods to the EU, a business will need to continue to use EMCS to record the duty suspended movement from a UK warehouse or premises to the port of export.
Carriers moving goods between the UK and the EU – Safety and Security Declarations
After the UK leaves the EU, in the event of a ‘no deal’ scenario carriers (for example hauliers, and train, vessel or aircraft operators) will need to make a Safety and Security Declaration for goods moving between the UK and EU. There are two types of Safety and Security Declarations: an Exit Summary Declaration (EXS) and an Entry Summary Declaration (ENS).
A carrier is generally required to submit an EXS to the customs authority of the country from which the consignment is being exported. For consignments exported from the UK the EXS generally forms part of the Export Declaration (a customs declaration).
A carrier is required to submit an ENS to the customs authority of the country that the consignment is entering.
Mitigations businesses may consider in a March 2019 ‘no deal’ scenario
Businesses should now consider the impacts on them in a ‘no deal’ scenario, which would mean a requirement to apply the same customs and excise rules to goods traded with the EU that apply for goods traded outside of the EU, including the requirement to submit customs declarations. Businesses should consider whether it is appropriate for them to acquire software and/or engage a customs broker, freight forwarder or logistics provider to support them with these new requirements.
Businesses may want to consider whether using customs procedures would be beneficial. These allow businesses to delay or relieve the payment of customs duty for goods they import into the EU until goods are ready to be released into free circulation. A customs broker, freight forwarder or logistics provider can advise in the event of a ‘no deal’ scenario whether one of these procedures would be suitable for your business. Customs procedures include the following:
- customs warehousing: this allows businesses to store goods with duty or import VAT payments suspended. Once goods leave the warehouse, duty must be paid unless the business is re-exporting, or moving goods to another customs procedure. The warehouse must be authorised by HMRC
- inward processing: this allows businesses to import goods from non-EU countries for work or modification in the EU. Once this has been completed, any customs duty and VAT due must be paid, unless goods are re-exported or moved to another customs procedure, or released to free circulation
- temporary admission: this allows business to temporarily import and or/export goods such as samples, professional equipment or items for auction, exhibition or demonstration into the UK or EU. As long as the goods are not modified or altered while they are within the EU, the business will not have to pay duty or import VAT
- authorised use: this allows a reduced or zero rate of customs duty on some goods when used for specific purposes and within a set time period.
For excise duty purposes, goods are not regarded as imported if they are immediately placed under one of these customs procedures. Businesses need to pay excise duty when these goods are released for free circulation, unless they are immediately placed in excise duty suspension.
As part of considering the potential impacts, businesses should take account of the volume of their trade with the EU and any potential supply chain impacts.
Businesses should now begin to look at the guidance for importing and exporting outside of the EU to familiarise themselves with the key processes. The UK government will provide further information on action to take to prepare for this scenario over the coming months.
As part of the government’s own preparations, the UK has applied to re-join to the Common Transit Convention (CTC) when it leaves the EU. The CTC facilitates cross border movements of goods between contracting parties to the Convention, by enabling any charges due on those goods to be paid only in their country of destination. The negotiations on the UK’s membership of the CTC are ongoing.
The UK government is committed to deliver a functioning customs, VAT and excise system that enables trade to flow, revenues to be collected and for the UK to have a secure border following the UK’s exit from the EU.
by M Roper | 1 October 2018
Posted 9 April 2018 | | 0 Comments
For most small and mid-market UK Companies, times have been getting steadily tougher when it comes to keeping a lid on supply costs. The UK has recently experienced significant inflationary cost pressures on imported raw materials thanks in part to the weakened pound, and the threat of import customs tariff costs grows by the day. Even if this isn't directly impacting on your business, the chances are that it's hitting much of your supply base, which will be either looking to pass some of this extra cost onto you or taking the hit and suffering financially (which ultimately ups your own risk of supply chain failure). These increased costs and risks mean that it's vital that companies have highly experienced procurement professionals in place to protect profits and mitigate supply chain risks.
Adding to the pressure, the large corporate competitors are able to leverage their size for competitive advantage. They have highly skilled procurement teams, busy developing future strategies not just to keep a lid on costs but to seize new supply innovations to make their products or services even more appealing to customers; their suppliers (some of whom also supply your company) are attracted to supply them so as to maximise sales revenues directly, and indirectly through bolster their own marketing by citing these well-known companies as clients, thereby demonstrating their credibility to prospective new clients (who may currently be served by your company).
So how can your small or mid market company enjoy similar advantages of cost/risk management, supply chain innovation and maximising your attractiveness to suppliers and clients alike? There are two challenges. First, finding high quality procurement leaders. Just as the largest companies can attract the best suppliers, so they can attract the most talented procurement professionals. With UK unemployment at its lowest for decades, procurement skills shortages make it even harder to find good people. The second challenge is that the most effective procurement leaders don't come cheap and as a smaller company you may not have the budget to attract or keep them.
So on the one hand you have an urgent need to develop an effective procurement and supply chain function, but on the other you may struggle to develop the skills or find the necessary salary budget to make the necessary change. How do you solve this business challenge?
Buying Support Agency (BSA) can solve it. We have a ready-made team of passionate procurement leaders, all with 15+ years of operational and leadership experience. They've worked in the corporate world but want a more flexible work-life balance which is why they want to work with BSA as associates. This flexibility for them is also flexibility for your business - our team tend to work with a client for typically 4-5 days per month, delivering exceptional value to the client, who avoids the cost of having to pay for all the traditional costs of having a senior level member of staff on their books. Clients have complete flexibility and can therefore expand or reduce our resource as needed. As an additional value add, all associates bring to clients completely free access to our BSA Buying Group, which enables them to quickly cut your overhead costs whilst also tackling some of the more fundamental strategic issues facing your supply chain.
Want to know more? Call 0800 254 0344 today and we'll arrange a conversation without obligation.
by M Roper | 9 April 2018