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Issue 4 2021 - Freight Business Journal NEWS COMMENT

We need to talk about Rules of Origin…

UK manufacturers and freight operators would benefit from a better understanding of tariffs and trade agreements, says Gary Dodsworth, managing

transport at Rhenus UK. Central to many of these rules is the concept known as Rules of Origin.

Having battled through a challenging first quarter of 2021, the UK freight sector is only now returning to something like business

usual. Transport

operators and manufacturers have had to assimilate vast quantities of information, to enable them to fulfil


documentation for the new cross- border

regime. For ourselves,

the first few weeks saw an influx of questions and data from customers, but despite the challenges, our in-house customs

capabilities enabled us to guide them through the changes. However, there’s a sting in the

tail – in the shape of a second set of controls that have been postponed by six months. Most businesses have

managed through the difficulties posed by the first swathe of new import/export rules introduced in January 2021. The second set of procedures, originally planned for April and July 1, have mercifully been put back until October, which gives manufacturers and

director of road

freight forwarders a window of opportunity to get to grips with the second wave of new paperwork. Much of the procedural red

tape surrounding Brexit concerns a principle known as the ‘Rule of Origin’, which deserves more attention. Put simply, rules of origin are used to clarify where materials used in the production of goods originate, as opposed to their source of shipment. This helps authorities to identify what customs duties and restrictions may be applicable on importation. There are two types of rules

of origin, preferential and non- preferential.

While the former

relate to trade between countries that have a preferential agreement, the latter relates to circumstances where there is no such agreement under WTO rules. Free trade agreements, such

as the Trade and Cooperation Agreement (TCA) between the UK and the EU offers preferential treatment to products originating in the contracting states – in this

instance the UK. For this reason, rules of origin are subject


specific negotiation and play a vital part of any trade agreement – hence the heat and light seen before the Brexit deal was struck back in December. In practice, this deal means

that products moving between the EU and the UK may benefit from zero tariffs – but only if it can be shown that they originate in either the EU or the UK. This all sounds pretty simple,

so why are we seeing businesses struggling with this aspect of the agreement so much? The devil is in the detail. Proving that goods satisfy the relevant rule of origin depends on factors such as the complexity of the goods being produced, the quantity of components and the number of countries involved in production. This is why UK manufacturers need to be transparent about where components originate to determine if the finished product being exported to the EU can be defined as ‘originating’ under the Brexit rules. Demonstrating origin can

be complicated if the finished product – be it a complex industrial dust extraction unit or sophisticated vehicle powertrain – comprises components from

several different countries. Here,

the original equipment

manufacturer will probably need to obtain suppliers’ declarations to prove the origin of materials used in production. Certainly, a lack of this type of information has been a real stumbling block to free-flowing supply chains so far.

Familiarity and practice will

no doubt help to iron out these teething problems. However, for some manufacturers, Brexit’s rules of origin challenge could continue

to bite, especially

if they are not able re-model existing supply chains to source sub-components that ensure compliance with the new rules. Many

of are our already well

customers advanced

with impact assessments to understand how the relevant rules of origin impact their operations. These don’t simply cover components, but also products made from animals, and this is where the next major hurdle comes in. From 1 October, 2021, all goods containing products of animal origin (such as meat, milk and egg products) will need to be pre-notified to officials, accompanied by the relevant health certificate. Failure to present a health


23 - 26 September 2021

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DSV to buy Agility

DSV Panalpina is to buy Agility’s Global Integrated Logistics (GIL) arm for US$4.2 billion (DKK 26bn) its largest acquisition to date. Described by the Danish-owned company as one of the world’s top freight forwarding and contract logistics providers in 2020, Agility had revenues of $4 billion, mainly air and sea freight and a workforce of about 17,000. It follows DSV’s previous acquisition

largest to date,

Swiss-based Panalpina which it bought two years ago. Integration of Agility’s activities into the company will make DSV Panalpina the world’s third largest

transport and logistics

company with a combined revenue of about $22bn (DKK 142bn) – an increase of around 23% – and a combined workforce of over 70,000. DSV Panalpina

added that

its Air & Sea division, already its largest, will be substantially strengthened with the acquisition of Agility’s interests and consolidate it as one of the largest

global forwarders with ● registered charity no. 1072105

close on 2.8m teu and over 1.6m tonnes of air freight a year. The

contract logistics capabilities, which are increasingly important due to complex supply chains and changing distribution channels, will add more than 1.4m sq m to DSV’s Solutions division, mainly in Asia Pacific and Middle East. It will also increase road freight in Europe and the Middle East. DSV said GIL was a strong

match “with valuable synergies as a result of similarities in both business models, services and strategies”. DSV Panalpina group chief

executive Jens Bjørn Andersen, commented: “The combination of our two global networks will provide us with the opportunity to offer our customers an even higher service level. GIL’s strong market position in APAC and the Middle East complements DSV’s network well and will support our long-term value creation ambitions. Our two groups already share a culture of entrepreneurship and local ownership, and we look forward to welcoming GIL’s talented staff to DSV.” Previous DSV purchases also


certificate for products of animal origin will mean that the goods will be unable to move between the UK and the EU. Looking ahead further, to

1 January, 2022, full import controls, checks and relevant tariffs will come into place for all goods. Safety and security declarations will be required for imports from the EU into GB. There will also be an increase

in physical checks to ensure customs declarations are being completed accurately, extending to products of animal origin, where sampling may take place.

In short, the customs

‘honeymoon period’ is coming to a close within the next few months and exporters without the full suite of appropriate paperwork at the point of shipment may see goods waiting on the docks. You may have never have

heard of rules of origin six months ago, but our advice is to get a good working understanding of the concept quickly – and make sure relevant paperwork is in good order well before the end of the year. Further details of these new

procedures will be set out on the GOV.UK website.

include US-based UTi Worldwide in 2015. The two companies expect

to close the transaction in the third quarter of the year, provided conditions are met and necessary approvals obtained. Until then, DSV Panalpina and GIL will continue to operate independently. Agility will retain control of its

Infrastructure arm. Analyst David Kerstens

predicted that the acquisition would create the world’s third largest freight forwarder with a market share of 4-5%, and increase its exposure to the Middle East and Africa. DSV Panalpina has completed

acquisition of South African- based courier Globeflight aſter competition authorities approved the deal, which was initially announced in December 2020. The acquisition includes all Globeflight’s operations in South Africa and Swaziland. The combined business will have about 4,000 employees serving around 12,000 customers across Southern Africa. The estimated 11 million courier shipments would represent an increase of 30% in volumes for DSV Panalpina in South Africa.

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