Traders should consider the issue of logistics from the broadest perspective as to the impact of the UK exit from the EU as a whole may have on the business, their suppliers and customers and how the changing of the terms of trade between Ireland and the UK might affect the way in which they or any of them do business.
It might be that alternatives are necessary to pre-empt a problem coming down the road. A strategy may be to take on alternative suppliers for carriers for small parts or a small share of the business as a trial contingency measure.
It may be that their suppliers or even their customers have taken the issue of customs in hand and require traders to use particular logistics providers who will undertake both their and their customs obligations, given that in each case of a cross-border purchase or sale there will be customs obligations on both sides. In some cases, UK suppliers have nominated and insisted on the use of a particular UK based freight forwarding company (with Irish reach)
Transport and Routes
Traders should consider the issue of cost and delay in relation to purchases from the UK and in relation to EU purchasers crossing the land bridge. They should factor in additional time and cost that might be involved in EU suppliers circumventing the land bridge by a longer direct route to Ireland from continental Europe, where this is an option. Familiar transport routes may not be as convenient or accessible as they were before UK exit from the EU and it may be necessary for traders or their logistics provider to establish new routes.
Traders should assess the road and seaport infrastructure that is currently being used by them and ideally by their suppliers. Traders should consider cost and time comparisons where any options exist in relation to transport. This may be something on which traders could consult with their logistics provider/freight forwarder. It might be that their logistics provider/freight forwarder can’t provide any other options and traders may need to look to other providers.
There may be options for switch from using UK land bridge to a direct shipping routes. They may or may not be available in the short run of a no deal exit may be available at an efficient cost in the longer run as the shipping industry adjusts.
Producer / Supplier
Where producers or sellers are situated in the UK the additional direct costs by way of customs tariffs, customs processes and regulatory costs may be offset in part or in whole by falls in sterling. However, in the medium to longer term, it is likely that inflation in the UK would reduce much of the benefit of the initial sterling fall. There may be increased UK labour costs due to inflation and a lack of EU immigration.
There may be changes in product importation and certification requirements for UK producers. UK manufacturers and producers may be expected to seek to ensure EU certification at an early date. There may be a lag time in the event of a no deal exit before UK goods are or can be certified for the EU market. Manufacturers and producers would be likely to avoid this scenario if at all possible.
Even where the particular producer / supplier is based in the EU26 traders should endeavour to look further up the supply chain to establish if there is a UK link in the chain. Even if particular components or goods do not cross the UK border the supplier may be exposed to the UK market by reason of its business being exposed to UK exit from the EU. There may be a risk that the supplier goes out of business at short notice causing difficulty to traders.
If the supply chain is exposed to risks arising from UK exit from the EU, it is important to look at possible alternatives. In some instances of particular risk, it may be useful to introduce a new supplier as a secondary source initially, until it proves itself and until traders can see that traders can efficiently purchase from it. There may be a benefit in testing out several suppliers of this is practicable.
Customs Costs for traders and others
There are likely to be additional costs to traders arising either directly or indirectly from customs. If traders have the customs declarations completed by their freight forwarder/logistics provider, then traders will still have additional costs in assembling and organising the relevant information which is required to be communicated on each order. Their provider will likely pass back additional direct costs in undertaking customs declarations on their behalf.
More significant costs may be passed back by their logistics provider which traders may incur costs at ports where there are Revenue interventions inspections causing delay and the need to chase and deal with revenue requirements. Similarly, Revenue act as agent for other governmental bodies including those in relation to product standards so that their interventions may relate to standards, defective products product safety checking and risks, rather than customs issues in themselves.
Even if traders do customs declarations, their carrier will have certain further costs because of UK exit from the EU including, in particular, more extensive manifests which will require interaction with traders and additional work for them which will be passed back. If traders do customs in-house traders will incur software costs as well as human resources costs in liaising with the carrier making the declarations and dealing with revenue queries that arise.
Traders are likely to need a facility for a deferred customs account whether in Ireland and the United Kingdom. The facility is required to be backed up by a guarantee in most cases.
Most commentators assume that even with significant mitigation, that a no deal exit and even an exit with an EU UK agreement would lead very quickly to severe delays at the UK borders with the backup of vehicles followed by shortages in lots of sectors. This might be mitigated by stockpiling which occurred before no deal exit dates in 2019 in many sectors.
The factors causing delays at borders are not difficult to see. It is estimated that a two-minute check on lorries coming through Dover could quickly lead to a 20-mile tailback. Dover, in particular, does not have significant room to accommodate queues of lorries of the length which may build up. In Dublin, multilane infrastructure has been built on existing port sites which will contain traffic, but it would still mean delays.
Lead times may be important in many businesses. Traders should consider the lead times from where a process originates or a product starts to where it is sold, where this is critical. Additional customs check and new regulatory compliance requirements on different routes may change the lead time. If this is an important issue, traders may need to take steps to ensure that traders can acquire goods in good time.
Possibility of Severe Delays Initially
The possibility of longer interventions at the port in the event of customs duties, customs checks and regulatory checks kicking in are obvious. There will be numerous small businesses and smaller logistics providers trying to acclimatise themselves to undertaking the customs process and filling in new forms with a high likelihood of mistakes on the learning curve. There may be a shortage of customs staff and many customs staff agents and traders will be on a severe learning curve, possibly under stress.
Quite apart from the ordinary policing checks that would be required and that can be now accommodated, a 10 to 15 times increase on the volume of consignments that need checking would by itself cause particular strain and delays on the port services. This combined with the above factors could lead to chaotic consequences.
It might be assumed that some steps would be taken to mitigate the worst effects. However, Ireland would not be free to simply waive customs law as it is an obligation which it undertakes to for the European Union. Even with some element of waiver like some turning a blind eye et cetera, the best-case scenario is still likely to be chaotic in around ports in the event of a no deal UK exit from the EU.
Road Transport Regulatory Issues
The issues around customs and import delays are the most obvious factors but there are many other factors which by themselves could cause chaos to their supplies and sales. Both UK carriers in the EU and EU carriers in the UK would technically fall outside the current common system of road transport licensing in the event of a no deal exit and even an exit with an EU UK agreement. In both cases, this would mean that they may not be authorised on the return journey to pick up goods from the other country. This may impact directly on the cost of carriage.
Of course, logistics providers may take steps to have a base in the other country (it cuts both ways) and would be expected to try to get around these particular issues at least over time. However, they may not always be able to do so and even if they can it would take time in the best of circumstances.
There are strict driving hours requirements in the road transport industry. The introduction of delays may make it necessary for there to be a second driver in cases where it is now possible to undertake deliveries with a single driver.
As with road transport operators’ licences, drivers’ certifications themselves are based on common EU regulations. One of the biggest problems on traffic from Turkey which has had a customs union with the European Union for decades is delays caused around documentation to prove compliance with operators and driver’s certification and licensing.
Subject to their general stockholding considerations, capacity and the possibilities of making sales (subject to a risk of a downturn in sales if applicable) some traders might find it desirable, to bring forward or increase their supplies of stock within the island of Ireland to mitigate against disruption in access to supplies or an increase in the costs of making supplies around likely no deal exit risk dates.
Many traders undertook a certain level of stockpiling both of their supplies of materials and the products they sell around the 2019 Brexit risk dates. Traders will best know their own stock holding costs and the logistical possibilities of acquiring and storing stock for periods around the exit dates. On the one hand, there could be considerable wasted expenditure. On the other hand, having stockpiled could be critical to maintaining and fulfilling existing customers requirements and maintaining their confidence. These may be difficult business decisions.
Traders may need to consider from the perspective of any existing contract commitments they might have and more generally in the context of maintaining customer trust, continuity of supply and maintaining the customer relationship, holding or being in a position to have immediate access to a buffer quantity of supplies to mitigate against any shortages and the risks of losing custom to another provider.
Putting in place buffer stock arrangements could involve significant work and costs. Traders could have to assess if such steps were worthwhile with reference to the risk that they could not get a product to the customer or from the supplier for a critical period after UK exit from the EU.
There is an increased working capital cost in stockpiling. In the event of a no deal exit and even an exit with an EU UK agreement, there is a risk in the case of sales to the Sterling area, of a fall in sterling, if it is unexpected. There might be a sudden economic slowdown affecting the economy as a whole and the industries to which traders supply in the event of a shock caused by a no deal exit. This may affect their sales, devaluing their stock, in addition to the sterling fall.