Remaining in the Common Transit Convention: what to do now
A small step in the right direction
On 17 December 2018, the HM Treasury announced that the UK will remain in the Common Transit Convention (CTC) after Brexit. The CTC eases bureaucracy when moving goods between the EU members, the EFTA countries, Turkey, Macedonia and Serbia. The UK’s membership of the CTC was tied to its status as an EU member and would have automatically ended after Brexit.
While the continued membership of the CTC will apply regardless of whether the UK leaves the EU with or without an exit deal, it is especially important to aid the smooth movement of goods in the case of a no deal Brexit.
What does the CTC entail and what is its importance?
The CTC allows logistics operators to make a single declaration when goods are transported across CTC member countries. Without CTC membership, a trader shipping from the UK would have to make customs declaration and pay import duties at every border. A shipment from the UK to Liechtenstein, for example, would pay import duties at the French, Swiss and Liechtenstein border. The membership simplifies this transport and this is important for UK exporters who ship to CTC countries.
Declaration is made only when the shipment arrives at the final destination. As the UK’s CTC membership moves certain customs formalities away from the ports and other points of entry into the UK, it is taking some pressure off these important junctions. Further advantages are a significant reduction in administrative burdens and cash-flow benefits by suspending payment of import duties until final destination has been reached.
Preparation is still crucial
Is the CTC membership of the UK after Brexit good news? Certainly. Does that mean companies should lean back and convince themselves that all is taken care of? Not at all.
At Carousel, we surveyed both German and UK businesses to see how they are getting ready for Brexit. The resulting white paper Brexit and logistics: A catalyst for change and innovation? has shown that companies of manufacturing industries have trouble preparing for Brexit, since they don’t know which scenario to prepare for.
While UK importers and exporters will benefit, this continued membership of the CTC will only help so much should the UK face a no deal Brexit. As such, it is crucial that companies start preparing now.
Don’t know where to start? Here are three steps you should start taking today:
1. Scenario planning
This means knowing which Brexit outcomes are possible and how they will affect your processes. With Brexit approaching fast, there are two realistic outcomes of the negotiations: the deal proposed by Theresa May and a so-called ‘hard’ Brexit (where WTO rules apply). Measure the impact of each outcome on your logistics processes and identify in what area you need to adapt now.
If you want an optimistic outlook: This is your chance to engage in some good housekeeping. Look at your processes, create new solutions. At the end of the day, you will come out stronger on the other end.
2. Talk to your logistics provider
Chances are that your logistics processes (including your supply chains) will be most immediately affected by the changes brought about by the UK leaving the EU. Since supply chains are complex, don’t hesitate to talk to your logistics provider. They can help you with scenario planning and preparing your supply chain for Brexit.
Make sure your logistics provider is prepared as well. Brexit will bring about countless changes in customs formalities. You and your logistics provider need to be on top of that. Depending on the outcome of the vote in the UK parliament, you might need to be ready as early as end of March.
3. Digitalize now!
We have been strong proponents of digitalization for years. For Carousel, digitalization is the key for transparency and visibility of the supply chain. In the context of Brexit, digitalization has become even more important.
The disruption brought about by Brexit must be met with flexible logistics services. Digitalization enables swift adaptation of processes and transport flows if needed. This helps organisations to be more fleet of foot, responding to not only issues, but customer demands too, and ultimately keeping and increasing their competitive edge.
Many businesses say that they cannot prepare for Brexit because they don’t know for what to prepare exactly. But there are steps that you can and should be taking immediately. The CTC membership of the UK is an important first step that will alleviate some of the potential problems that a ‘hard’ Brexit would bring. While the benefits of the CTC membership are limited, companies do still need to start preparing now.