22 November 2017

Logistics industry concerned over lack of Customs Capacity to cope with Brexit

As persistent uncertainty continues over the future relationship between the EU and the United Kingdom, customs authorities on both sides are becoming seriously concerned about the potential impact of a no-deal situation. Several newspapers and websites have published articles about the concerns voiced by customs authorities in the UK and the EU27 regarding their capacity to cope with such a scenario and the shortage of customs officials to manage the impact. CLECAT believes these shortages must be addressed, and a transition arrangement agreed, as soon as possible, in order to minimise the shock of the UK leaving the EU.

Preparing for the worst

Numbers on the necessary recruitment vary hugely between studies and expert opinions, but it is clear in any case that thousands of new officials are needed to cope with Brexit. Currently most customs authorities in western Europe are already suffering from a shortage of officials, which leads to delays and impacts on service for trade and logistics. Only recently for example, Belgian customs authorities “proudly” announced that over the past year, they were finally able to reduce their backlog in repayment requests by 80%, totalling  39 million euro since 2015. Repayment is just one example of where customs authorities have difficulties dealing with workloads as it is. The general increase in trade and developments like e-commerce, leading to more and smaller declarations, have already led to capacity problems for customs authorities. At the same time customs processes have become more and more complex due to ever increasing requirements concerning, for example, food health and safety, anti-terrorism and environmental requirements. In the meantime, customs authorities are trying to implement the new EU customs legislation (the Union Customs Code) before 2020, which includes an overhaul of almost every customs IT system in the EU (including hundreds of different systems) and a re-assessment and replacement of all customs authorisations.

Because of these developments in cross-border trade, not only is the recruitment of new customs officials urgently required, but these officials also require different training and qualifications. It is a general misconception that Brexit would lead to traditional customs checks at the borders and paper-based procedures. First of all, less than 5% of all goods are stopped and checked physically at borders at present. This does not mean that there is no supervision by customs authorities, but that supervision and enforcement is made possible with different instruments. In most EU countries (including the UK), customs processes are highly digitalised and there is an extensive use of automation, simplifications and authorisations. In the Netherlands for example, border posts suitable for traditional customs checks have almost completely disappeared. In order to operate in the current customs environment, companies need to acquire authorisations and simplifications, and customs has to assess the requests of trade. This requires a completely new skill-set from customs officials in process and IT auditing and not so much the skills which ‘traditional’ officials at border-control used to have. Today, highly educated persons with university degrees still require several years of dedicated training before they can operate fully independently in the current customs environment. There is therefore a clear case to be made that there is not enough time to recruit and train sufficient numbers of officials by March 2019.

More fish to fry

Furthermore, it is not only customs that needs thousands of new employees with the right skills. There are numerous other agencies which have a role in inspecting goods or compliance with regulation at borders. Immigration, aviation security, pharmaceutical inspections, anti-drug and weapons trafficking, fake goods, environmental inspections, posting of workers and agricultural inspections all involve controls at borders carried out by different authorities. Agricultural inspections in particular can lead to bottle necks at borders, because for example veterinary and phytosanitary controls still require paper-based procedures and physical inspection at the borders. Factors like trade facilitation and seamless flow of goods are hardly even taken into consideration by these authorities. Next to a need for extra capacity for different authorities, thousands of companies also need to hire additional customs experts, only counting the companies which have already been dealing with EU external trade. It is almost impossible to estimate how many companies would need expertise in customs matters, trade compliance and border operations and which have not previously dealt with EU external trade.

Don’t run before you can walk

To soften the blow of Brexit, the UK appears to be counting on a good trade deal, “innovative” solutions and their future customs IT system, called CDS. Unfortunately, all of these, and especially CDS, could lead to even more disruption of trade and logistics. The same system (actually consisting of several systems) has been implemented in the Netherlands over the past couple of years. Even though the system is more future proof and has some obvious advantages, it took the Netherlands many years to fully implement it. In October 2013 the first declaration was made, but only in April 2017 was Dutch customs able to conclude that the system worked well enough to fully support all declaration types. Even with such a long implementation period, the system is still showing problems, creating a regular need to fall back to 20-year-old manual and paper based procedures. Implementing such a huge and complex system already leads in itself to disruption in trade and logistics, let alone implementing it at the same time as Brexit. Next to that, a trade deal, similar to the Free Trade Agreement (FTA) with Canada (CETA), would lead to less duties, but would complicate the customs process itself because extra authorisations and documentation are needed as proof of the origin of the goods. New, “innovative” solutions could potentially also disrupt trade in the short term because processes, systems and authorisations already in place would have to be renewed and all customs experts (public and private) would have to be re-trained for such a new solution.

Plans are of little importance, but planning is essential

CLECAT finds it somewhat reassuring that customs authorities of the EU 27 and the UK are starting to express their concerns about the impact of Brexit and to prepare for a worst-case scenario. Nonetheless, CLECAT, representing the companies which are in charge of over 80% of all customs declaration in Europe, remains convinced that Brexit will lead to huge disruption if the UK were to leave the EU immediately in March 2019 without a decent transition strategy. In a press release on 18 October, together with 14 other major trade bodies, CLECAT has already called for a guarantee of a seamless transition period after March 2019, which replicates the current commercial, regulatory and trading environment. This transition period should last until clarity and certainty can be provided for long-term EU-UK partnership agreement and both companies and authorities have had enough time to hire and train staff, implement new systems and adjust processes in support of any final agreement. Furthermore, as businesses will begin in early 2018 to plan their activities for the years ahead, a continued lack of clarity over the transition arrangements and future relationship will lead many to assume the worst and plan for a no-deal/no-transition arrangement. Complete re-planning would then be needed if a transition arrangement were to be announced at a later point, leading to even further costs and upheaval. Without clarity and certainty as soon as possible, any deal, system or highly innovative solution will fail already at the outset, creating major disruption for all.

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