Earlier today, Rishi Sunak announced additional support will be available for businesses who have been impacted by the Omicron variant. So, what do we know? Businesses…
For businesses that trade overseas, Covid-19 brings major challenges. Exporters, importers, intermediaries and supply chains will all be affected as the virus stalls the world economy and global trade. However, these businesses will find themselves at the forefront of the global recovery effort and key steps can be taken now in order to maximise resilience.
The current trade landscape
Emergency legislation is now widely in force with over 1/3 of the world’s population under some form of lockdown. While borders have been closed to the free movement of people, many are still open to freight, albeit with increased costs and greater risk of delay or cancellation.
At sea, ocean freight is still moving but may bypass certain ports as demand decreases. The number of inactive container vessels has risen steadily as the situation evolves. You should maintain contact with your shipper to ensure timescales are as expected and utilise track and trace technology where available.
In the air, many international passenger aircraft have been temporarily re-purposed into air freighters. Air freight costs are expected to rise across the industry and in many cases have already risen significantly. Current weak exchange rates will benefit exporters but will reduce the affordability of imports. On the continent, the EU has called on member states to introduce green lanes at border crossings to reduce delays.
The current situation highlights the sensitivity and fragility of supply chains. Suppliers may have limited capacity or ceased trading altogether. Your supplier may be operational, however this will count for little if your supplier’s suppliers are not. For a typical business, a key measure will be to maintain communication throughout the supply chain with all stakeholders. This will allow for expectations to be managed and issues to be addressed and if necessary, alternative suppliers to be sought.
There are a number of key considerations for overseas traders:
- Are your suppliers overseas and are you monitoring their status?
- How resilient are your suppliers? (some EU countries are closing down manufacturing plants)
- Do you have adequate stock?
- Have you found alternative suppliers locally?
- Do you have access to a Customs Warehouse to improve cash flow?
- Are your customers in a position to accept goods?
- Are you part of a supply chain for critical goods?
- Have you checked freight availability and delivery slots with your forwarder?
- Do you have access to Track and Trace technology to live monitor your supply chain?
- Have you kept your customers up to date with issues you are experiencing?
- Do your employees have access to computer systems to allow the preparation of customs documentation (e.g. Commercial Invoices)?
- Can all relevant teams (e.g. Finance, Procurement, Sales) easily stay connected?
- Have you reviewed and applied for government support where available (such as the Job Retention Scheme, more information on the scheme can be found here)?
Terms of Sale/Purchase
- Have you reviewed contract terms to understand where you stand with liability or force majeure clauses etc.?
- Have you performed updated credit reference checks and counterparty due diligence to maximise the likelihood you will be paid? Most credit check sites are updated periodically and may not show the current position accurately.
- Consider trade in 2021 (post implementation period), is trade with the EU going to be higher or lower given the current climate, would you be prepared?
- Consider diversifying your supply chain to limit risk?
- Consider registering for any special procedures that would mitigate costs and risks?
Payment and Trade Terms
Agreeing payment terms is increasingly important within the current environment.
Credit reference checks should be reviewed and updated, alongside terms of trade. In particular, you should review and make sure you are happy with any agreement which governs:
- When payment is received (Export)
- When payment is made (Import)
- Who has control over the original Bill of Lading
Training will become increasingly important and businesses that already have a sound knowledge of customs procedures and compliance will have a distinct advantage over their competitors, including an increased ability to maintain cash flow by using available reliefs.
Any downturn in demand may free up time that would otherwise be unavailable and will assist with planning, not only recovery from Covid-19, but how best to meet the challenges and opportunities at the end of the Brexit transition period in 2021.
For businesses considering submitting their own customs declarations post implementation period, Government grant funding remains available, which in most cases will refund 100% of your training costs. PKF Francis Clark has the expertise to provide training and assist in implementing practical steps to improve duty management.
If you would like to find out more about fully grant funded customs training, please click here.
This is an extremely challenging time to do business. However, businesses that ask the right questions and take appropriate action now will find themselves in a far better position. After Covid-19, international trade will be vital to the recovery effort for many businesses and as a firm we would like to help in any way we can.
Please contact the customs team at: [email protected] if you would like to discuss anything further.