26.02.2021 – 12.40 – Brexit was pursued in England with the aim of regaining full economic independence, which would have allowed a return to those mercantile and industrial origins considered the secret of Anglo-Saxon success.
And yet here lies the English paradox, because having abandoned the European Union meant turning its back on a gigantic single market within which there were no real customs barriers.
Therefore, in the name of free trade, England has abandoned the very “free” area with which it had fruitful relations; a paradox that is now turning into a drama, starting with the myriad of duties and customs that stand between the Albion and European markets.
This is what emerged from the last convention promoted by Assologistica – “Trade & cooperation agreement EU-United Kingdom: impacts and consequences on the supply chain and transports” – turned to investigate the impact of the Brexit on the world of logistics with special reference to the next months, fundamental, because they will determine the trend of the markets and the relationships with the newborn border with England.
The conference was attended by representatives of the Customs Agency, lawyers, tax experts, customs officers, insurers, entrepreneurs and freight forwarders, with a remarkable underlying synergy, aware of the need for cooperation to overcome the bureaucratic hurdles of a “new world”.
Dr. David Morgese, responsible for the indications of the Customs and Monopolies Agency for Brexit, stressed that the bureaucratic procedures for companies “are not that difficult”, yet some problems could emerge, especially for those less accustomed to these practices.
The Customs and Monopolies Agency is currently “flooded” with paperwork related to Brexit; after all, England remains the third largest trading partner with Italy; the consequences were largely imaginable.
Marco Sella, Customs & Global Trade Manager, once again underlined how many and what kind of goods transit through England: we are talking about 4 million tons per year, transported by 11 thousand trucks crossing the Channel every single day.
Consider, for example, how one third of the food consumed by the British comes from the European Union; 50% of the wine consumed by the United Kingdom comes from Italy.
Sella warned that “the conditions of a single market will not be replicated” but rather there will be “a process of physiological re-adjustment”. More attention will have to be paid to the ‘tracking’ of goods by companies, both inbound and outbound.
A possible solution may be offered by the so-called ‘Logistical envelope’ designed by the French, i.e. a legal-fiscal container that contains all the necessary export customs declarations, greatly simplifying the process.
“Northern Ireland is not subject to normal customs procedures, because it is considered part of the intra-Community market, even though it is part of the United Kingdom. This is undoubtedly a special situation.
There is the possibility for an operator to be certified as an AEO – Mutual Recognition Agreement with a reduction in border controls (and costs); as is already the case with China, Japan and the United States; but this would be an improvement not comparable to the status of a single market.
Lawyer Ettore Sbandi, an expert in tax and duty law, sounded the alarm on e-commerce, “a sector that makes us work with counterparts who are not equipped to do customs”, so it will no longer be “possible to entrust goods to a courier and forget about them”.
On the other hand, online sellers dealing with the UK will need to understand the criticalities of their sector, choose carefully which platform to approach, whether to operate on their own or with intermediaries, etc. etc.
Furthermore, they can’t stop at simple “customs formalities”, because “there is a world of taxes that must be managed by the companies”.
The lawyer Claudio Perrella, Partner of RP Legal & Tax, instead led a speech on the new effects on Incoterms and supply chain contracts.
Regarding the topic of Brexit & Logistics & Customs, Perrella specified that “the part of the iceberg that has emerged so far is only a tenth; there is a lot of material to be discovered”. Although, on the subject of the supply chain, he specified that they had been working for years “with remarkable foresight” precisely to prevent the worst.
A quick speech by Chiara Fanali, Director of the Internationalisation and Foreign Trade Area of Assolombarda, lamented “the difficult situation on the export front that involves all companies, not just the least equipped.
In particular, they find themselves in a limbo of duties and taxes “those who signed contracts in the period of EU trade prior to Brexit, but whose implementation is expected in 2021 or in the following years”.
At the heart of the conference was the intervention of an insider of the Anglo-European border, the source of many headaches for customs officers and entrepreneurs in recent months: lawyer Adrian Marsh offered the point of view of a Briton.
Brexit, he argued, has been ‘an incredibly divisive issue’ in England, a source of deep social discrepancies.
In particular, it has affected the manufacturing sector, whose success ‘depends on the ability to move goods quickly across borders’.
Marsh was also one of the few speakers to point out that the Covid-19 emergency has exacerbated the logistical situation: the Brexit would not have been so devastating without the Coronavirus.
We must therefore accept the reality of a ‘custom border between the EU and the UK’; a new border, with all that entails.
Marsh noted that demand for more storage space has skyrocketed in both the UK and France, with a knock-on increase in price. Some form of price control mechanism will be needed in the future.
The delays at the borders have not yet been as dramatic as had been feared, but there have been considerable delays due to a lack of proper documentation.
The biggest problem that will persist post-Brexit and post-Covid will remain customs clearance.
For forty years, the English lawyer observed, the Custom Agency had acted for both England and the European Union; now, instead, it will have to be an indirect representative, without the security that existed previously. A fact that has taken “everyone a bit by surprise”.
Another underestimated problem remains insurance, whose market is currently dominated by unsustainable high prices, which will have to ‘settle down’ to meet the new demands.
In the field of e-commerce, the Brexit has caused a flood of returns to the UK; as soon as the buyer discovers additional costs not included in the initial price, three times out of four he prefers to return the goods; which poses a further problem: who pays the courier? It is unacceptable that in future the cost of insurance and customs will fall on the customer as an additional charge, separate from the price of the item he or she bought.
Dr. Alessandro De Felice, President of ANRA, pointed out that “there are more delays in imports than in exports” essentially because European customs are much stricter than English ones, the latter being aware of how England is directly dependent on European goods for its food needs.
The problem, in terms of delays, remains the land border; there are now zero problems at sea, which raises the inevitable question of whether we should reduce the rather polluting truck traffic.
There is also the critical issue of the system adopted in Northern Ireland, which is halfway between the United Kingdom and the European Union.
Many Italian companies are planning to set up warehouses in Ireland and transit through that area, considering that customs operations do not seem to be as strenuous as the bureaucratic red tape that plagues the English Channel.
Dr. Nicolò Marrali, Sales & Customer Care Manager of Hannibal (Contship Italia Group), brought in his experience in the field of multimodal transport.
The main novelty lies in the customers’ demand for a “single point of contact” without having to split their duties between Rome, Brussels and London.
At this stage, Hannibal has developed a system that channels English information to the Rotterdam office, which in turn talks to the Italian office, the latter being the central point for all data from both the EU and the UK.
A possible solution for the UK, concluded Marrai, could be the ‘controlled customs corridors’ whose experimentation in Europe has proved positive.
Engineer Fabio Giovanni Atzei, Head of Distribution Logistics at Versalis, brought his experience of these first traumatic months within the logistics sector responsible for the chemical development of the ENI group.
Atzei, noting that ENI also has a base in Scotland, outlined how importing and exporting with the UK is crucial for the company with three thousand trips a year.
The first obstacle was having to hire a dedicated operator with the sole function of handling customs operations for goods leaving England. The transit documents, quite simply, remained the biggest problem.
In the first phase, the necessary authorisations arrived only very slowly; the application was made on 1st December, but was only ‘released’ on 22nd February, blocking the transits.
The goods left on 10th January 2021, arriving only in early February. The English customs offices are ‘in dire straits – also because of Covid-19’.
On the other hand, paradoxically, there are zero checks on goods entering England, essentially because English customs have insufficient staff; some are ill, and some have yet to be recruited in order to comply with the new Brexit-related obligations.
In addition to the delays, there have been extra costs, even ‘50% more than the normal tariff’; all this while the goods in the containers remain blocked ‘even for ten days in the port of Rotterdam’. The solution, according to Atzei, lies in innovation, “in looking for new ways, expanding the number of operators, being flexible”.
Finally, lawyer Alessio Totaro, Partner at RP Legal & Tax, concluded his speech with some remarks on inland logistics, which will see some major obstacles in the near future.
Due to the strict line adopted by the British Parliament, the fleet of trucks travelling from Europe to England and vice versa could face serious difficulties.
The UK would like to be able to use its own drivers for lorries passing through England, thus depriving the “Eastern European fleet” which has been operating for several decades.
But this will inevitably lead to a dramatic shortage of drivers and a slowdown in lorry traffic. The “hard line” will also be pursued with regard to cutting emissions, licences, with ad hoc licences, and the management of packaging and pallets that are probably no longer reusable.
In any case, there will be “a drastic reduction in the number of drivers authorised to drive to and from the UK”. If you want to take legal action, Totaro noted, you have to be careful, because “the UK justice system is particularly expensive with much higher compensation rates, much more dangerous than in Italy”.
Ultimately, although the trauma of a ‘hard’ Brexit has been avoided, the current situation is reminiscent of ‘a well-built castle, but if one component is missing it risks collapsing’.