100 days ago, the Trade and Cooperation Agreement (TCA) triggered the biggest change in commerce since the UK joined the EU 48 years ago. Adapting to this change has been an enormous learning experience, and how businesses act on what they’ve learnt in the next 100 days could lay the foundation for supply chains of the future.
The biggest problem is what we don’t know
In the first quarter of 2021, imports and exports in and out of the UK declined by 29% and 42% respectively. The trouble is, it is proving difficult to estimate how much of this decline can be attributed to the pandemic and if the second wave is further masking some of the consequences of Brexit.
The TCA has set in motion new border protocols for customs declarations, duty calculations, excise tax, value-added tax (VAT), product certifications, and more. It is estimated that businesses in the UK will need to process over 200 million extra customs declarations each year post-Brexit, compared to around 55 million last year. All the additional paperwork is adding new complexities to the entire import-export process, and customs experts are now having to spend all their time staying up to date with new regulations and making sure documentation is accurate.
What’s more, these are early stages. Importers must prepare for the next cycle of uncertainty, starting July 1, 2021 when full border controls come into play.
Faced with the unknown, how are businesses recalibrating their supply chains?
Most businesses would agree that powering logistics with technology and data is the best way forward.
At an operational level, the right tech solutions can help simplify supply chain processes, allow for the smooth flow of documentation from one stage of the supply chain to another, provide a single version of the truth regarding the status of the cargo to all stakeholders, identify inefficiencies, and support continuous improvement. Simultaneously, supply chain data can inform critical decision making by enabling companies to monitor, map, forecast, plan, and adapt strategies even under volatile circumstances.
It is important, however, for businesses to acknowledge that the power of technology (and data) lies in how it is connected. As more suppliers, customs authorities, logistics service providers, and customers integrate, the supply chain will grow in intelligence and resilience.
In anticipation of a connected, data-driven future, supply chain teams also need to start hiring or building the right expertise. Data analysts who specialise in monitoring, trendspotting, and predicting disruptions in trade are going to be in high demand in the near future. They will play a key role in providing alternative solutions for sourcing, manufacturing, logistics, and distribution.
Brexit’s impact is not local
The new rules of origin under the Trade and Cooperation Agreement (TCA) have extended Brexit’s impact well beyond the borders of the UK. Global supply chains that run through the UK and the EU from other countries are also having to manage new tariff calculations and other regulatory complexities.
To qualify for zero tariffs and quotas, as per the TCA, multinational companies need to prove that their goods “originated” within the EU-UK trading bloc. Documentation, pertaining to the rules of origin, is particularly challenging for complex, interconnected supply chains in the Automobile, Aerospace, Electronics, Pharmaceuticals, and Biotech industries, because their products often depend on parts or chemicals manufactured outside the EU-UK bloc. To begin with, a minimum percentage of the components need to be sourced from within the bloc. Additionally, the percentage changes for different products, making calculations time-consuming.
Global Retail, Textile, and Lifestyle brands that source products from outside the bloc, warehouse them in the UK, and then export them to the EU are now also subject to EU tariffs. This often raises the cost of raw materials and is significantly altering the cost-benefit analyses of such international networks.
Consequently, multinational corporations are reforming their approach to logistics. They are setting themselves up for success in a post-Brexit world by thinking long-term and prioritising the need for resilience in every aspect of their supply chain.
Maersk offers a logistics partnership that can help businesses take on any post-Brexit challenge. From determining the origin of a product and calculating duties to completing certification and keeping accurate records for the TCA’s new requirements, our customs experts handle all cross-border processes, especially in worst-case scenarios. Our portfolio of products opens up endless possibilities for global supply chains to re-engineer their operations, so that they can be prepared for whatever the future has in store for them.
To learn more about what Brexit has in store for importers and exporters, look through our Brexit Timeline here.