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Issue 1 2019 - Freight Business Journal


units) having been closed


down - though quite what sort of reception you would get there if you did, no one knows. Also for imports, how would you pay duty or VAT as this is now handled electronically through brokers and their soſtware? In any case, a broker can valuable advice on


classification that could pay for their documentation fee several times over – money that most businesses would consider well- spent. Baker points out: “Take the


example of someone importing plastic Christmas novelties from China; you might have baubles, other types of decorations, small figurines or whatever. If you ask Customs to classify it for you, they might do so but put it under one heading, and that’s likely to be the one that has the highest duty rate. A Customs broker could save you money by putting everything into different headings, many of which will be lower duty.” It isn’t always obvious which


is the correct duty to apply. For example, a ‘classic’ car may potentially be charged at lower duty and VAT rates than a modern run-of-the-mill one. He points out that many


customs brokers and consultants are themselves ex


customs


officers, well versed in the subtleties of the customs tariff. As might be gathered, there


is a huge amount to learn when it comes to customs documentation and formalities, which in itself is a significant barrier to entry. Baker states: “I’ve been in this business for 50 years, and I am still learning things, on a daily basis.” CPCs (customs procedure


codes) are a subject in themselves. These are the numbered procedures that are used in different situations and there are “endless numbers” of these to deal with all sorts of situations. Here is just one example: goods


being returned to the UK aſter being rejected by the overseas importer may be allowed back into the UK duty free. The appropriate procedure code is necessary to make a legitimate claim for duty free admission. A re-importation claim will oſten trigger a request by Customs for a document check, maybe, in the example quoted, proof of export, an export bill of lading, or possibly a letter from the customer explaining why the


goods are being sent back. Inward and Outward


Processing Relief all have their specific codes. Punch in the wrong CPC code


and you could spend days or weeks trying to sort out the problem, or end up paying more duty than you should. Post-1993, some very intricate


cross-border supply chains have developed, with raw materials, semi-finished and finished goods criss-crossing the EU’s internal borders. If Brexit turns these back into ‘hard’ borders, firms will need help in unravelling which goods are dutiable, and by how much, always assuming of course that the added complexities don’t make firms rethink their operations.


Brexit blues


At the time of writing, the effects of Brexit on customs was very unclear; in late November, no one had any definite idea what it would bring in terms of increased numbers of clearances. Clearly, said Baker, “in the event of a ‘no deal’ scenario, businesses importing goods from the EU will also be required to follow customs procedures in the same way that they currently do when importing goods from a country outside the EU.” The vast majority of import


clearances that brokers handle today are from countries outside the EU, much of it in deep sea ports such as Felixstowe, Southampton or London Gateway. Only around 5% of the road traffic coming through Dover currently requires clearance, typically from countries such as Turkey or Switzerland and this oſten also involves discharging of transit guarantees. His expectation, based on


government statistics is that customs declarations will rise from 55 million a year to 255m in the event of a hard Brexit, which would increase his company’s workload from its existing client base alone by 500%. But he adds: “We are


responsible people and view this as a daunting prospect rather than hitting the jackpot. There would be quite simply too much work if we tried to accommodate too many additional new clients.” It’s unlikely that the rest of the


freight industry would be able to help much either. While some very large freight have their


forwarders own customs documentation departments,


many smaller freight forwarders offering customs services already subcontract a substantial part of the paperwork to customs brokers. There has been some ill-


informed (in Baker’s view) comment that customs brokers have failed to prepare for a ‘no deal’ Brett and “are unable to understand why we have been reluctant


to employ and train


a legion of customs clerks to accommodate possible new requirements.” Baker says that his company


could, if asked, take on some additional work, provided it was reasonably straightforward, but some of the more complex work is actually more akin to customs consulting, of which he already does a large amount (The GeorgeBaker Group’s new office in London has facilitated this.) The Government has


promised financial help for the sector to prepare for Brexit but Baker has bad memories of unfulfilled promises aſter the last seismic event, the creation of the European Single Market on 1 January 1993. In the run- up to that, during the 1980s, he explains, “customs brokers like


Most of us were ruined – literally.” The brave investments of the


1980s in computer power turned out to be a massive mistake and hundreds of excellent customs brokers went out of business virtually overnight, with tens of thousands of professionals thrown out of work. And the compensation promised by the Government and the European Community never materialised. As one of the survivors said recently: “We were abandoned and leſt for dead.” GeorgeBaker itself lost 86% its business overnight and


of


took more than ten years to pull through, surviving partly by diversifying into other areas such as transport.


the industry only learning of it through the pages of a national newspaper, hardly inspires confidence either. Also,


Baker points to the


fact that the Civil Service itself seems to have done little or nothing in terms of beefing up its own staff strength in crucial areas to cope with the demands of Brexit. Could that be a sign of Government’s thinking on the likely outcome of the negotiations? He has though given some


thought as to how his company might cope with a sudden upsurge in clearances


aſter


a hard Brexit. Fully trained customs clerks hardly grow on trees, even in Kent, the Garden of England, and to fully train a Customs department takes about five years, he says. Given that the events of 1993 are now a quarter century in the past, it’s highly unlikely that there will be many former customs clerks willing to get back into the fray, even if they could remember what they were doing all those years ago. A


new recruit


us embraced new computer technology and invested heavily in automation. We worked in cooperation with Customs and port authorities to develop excellent new systems to manage the enormous volumes of freight crossing borders within the European Community. But fierce competition between brokers meant that our fees were disappointingly low. Customs brokers of that era were forward thinking and did an amazing job but many still


struggled


financially.” Then on 31 December 1992:


“Because of a political decision outside our control, the borders were taken down overnight when the UK went into the single market. The huge volumes of inter-EU traffic no longer needed customs documentation. The overwhelming majority of our work completely disappeared.


Brokers such as George Baker had to diversify into areas like transport aſter 1993. True, the Government has


recently promised a modest £5m for staff and £3m for technical support to help customs brokers prepare for Brexit, but that will be a mere drop in the ocean when


split among several


hundred or even thousands of companies. Baker states: “If we were to employ, say, 25 extra people, train them , lease offices to accommodate them plus install


the necessary kit and


communications, that might cost our company perhaps £0.75 million minimum , especially as we would have to give the people a pay-off in the event that they were not needed.” (And his hunch is that the UK will probably somehow remain in the EU customs union, at least for the time being.) The way in which the news


of the financial support was dribbled out by Government,


could


conceivably be allowed to do some of the more repetitive entry work aſter around a year in post, but Baker would be reluctant to let anyone with any less experience do entries unaided and without supervision. “It’s not just a matter of knowing which boxes to fill in. You also need to have a grasp of your responsibilities.” Getting a decimal point in the


wrong place could mean tens of thousands of pounds of over- or under-paid duty. Getting a release number wrong in a port inventory system could have untold ramifications. Moreover, duty valuations


and VAT calculations can be extremely complex. There are different currencies to consider and actually carrying out a customs valuation will need at least a year’s training, even in the simpler cases. It is possible to envisage


///CUSTOMS CLEARANCE


a scenario where, if brokers were deluged with clearances, untrained staff could be recruited to do some work under the very close supervision of more experienced people, but Baker for one prides his company’s low error rate and wants to keep it that way. Customs broking has


never been an easy sector to recruit in. While there is some comprehensive training in customs entry available from BIFA, HMRC demands no recognised formal qualification and it is in many ways a very undervalued profession, says Baker. Margins in clearance work


have generally been thin, which makes it hard to pay decent wages, he says, while the recent history of the sector, with the haemorrhaging of work aſter 1993 has hardly helped dissipate the sunset industry image. Moreover, the customs


landscape is continuously evolving, so staff need almost constant retraining. Having only just digested the contents of the EU’s Unified Customs Code a couple of years ago, the industry is now having to get to grips with the implications of the CDS replacement for HMRC’s Chief computer system – except, of course, nobody knows exactly when that will be fully introduced. Some reports suggest that, with soſtware testing falling behind time, it will not now go into full operation until 2020. Baker states: “The new


Customs computer system CDS is unproven and we are extremely concerned that it may not be anywhere near ready for March 2019. How will we train new staff, and our current staff on this system if we can’t access it?”


But, customs brokers are


trade facilitators and Baker for one is “desperate to help and support our fellow professional involved in international trade. Despite everything I have said, our preference is still to invest in the technology and people necessary to process the enormous increase in Customs declarations. It is a business opportunity for us, so if the final Brexit deal is 100% certain to involve documentation at borders, and if there is a clearly defined transitional period in which to make the essential preparations, the UK can rely on us at George Baker Group us to do our bit and a lot more besides.”


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