Minimise delays at customs with AEO status

The UK has long been the most important market for the Irish farm and food sector. With Brexit, while diversification is important, it is still vital Irish companies can ensure fast, steady delivery into Britain. One method to help minimise customs delays is authorised economic operator (AEO) certification. While not the solution for every company, it can provide some real benefits.

 

The main advantage of AEO is priority treatment at physical checks. It’s a security standard, which was introduced by the World Customs Organisation in 2008. The concept was to create a set of internationally recognised safety and security standards that companies could implement in their facilities so as to minimise customs delays. With the help of Enterprise Ireland, bacon producer Oakpark Foods is in the process of acquiring this certification. Financial Controller Danny Madigan said it is crucial: “Considering the nature of our product, which is chilled, delays in the supply chain could have detrimental effects on shelf life and product quality”.

 

Oakpark Foods meat products

Oakpark Foods

Oakpark Foods was originally a bacon curing house and moved into sliced retail bacon packs in 2008. As part of its diversification efforts, the company recently opened a new facility in Clonmel, Co. Tipperary, which produces white meat products. Currently when exporting to Britain, only one docket is required but after Brexit: “You’ll have to talk to Irish Revenue and Inland Revenue [UK] and make declarations on both sides”. For Oakpark, it is not enough for the freight company they are using to have AEO status: “It is the responsibility of the company to ensure that the correct safeguards and checks have been carried out before the product leaves the site to ensure it has not been tampered with in any way. AEO-certified companies need to have these safeguards in place, which is why there are fewer checks required at port level”.

 

The steps to gaining AEO status

To become an AEO, a self-assessment questionnaire (SAQ) is required by the Revenue Commissioners. Revenue then carries out an onsite assessment within 120 days, after which, AEO status will either be granted or rejected. For Oakpark, there is a specific business case for getting AEO status: “We basically weighed up the effects that delays in our supply chain would have on our products and decided that everything that could be done to avoid this should be explored”.

 

Support from Enterprise Ireland

Danny said Enterprise Ireland is providing extensive support: “They’ve supplied R&D supports to help us diversify into other markets and improve our product. They’ve provided advice and guidance through their Brexit Act On Initiative, which formed the cornerstone on which our Brexit plan was formulated. We’re also hoping to complete a Lean programme in the coming months, which will help the company to become more competitive, and alleviate the extra costs that will invariably be incurred as a direct result of Brexit”. The Brexit: Act On Initiative is broken down into three categories: strategic sourcing, which reviewed Oakpark’s supply chain and identified strengths and weaknesses, customs and logistics, which identified the pressing need to register as an AEO, and, thirdly, financial and currency management. Help determine the case for AEO in your business through the support of Enterprise Ireland’s Brexit: Act On Initiative.

Don’t delay logistics plans to prepare for Brexit

Don’t delay logistics plans to prepare for Brexit

 

 

Irish exporters should, by now, have progressed past preparation, and have begun to act in response to the disruptions Brexit is expected to bring, even if it is unclear how severe those disruptions will be.

Once the UK leaves the customs union at the end of the transition period, it is possible that a wide range of goods exported to Britain will be subject to additional tariffs and duties. A Brexit readiness workshop hosted by Enterprise Ireland and the Irish Precast Concrete Association, heard that, Irish exporters can expect to face a substantial increase in bureaucracy and paperwork.

 

Impact of potential delays

 

An example of the delays that could accrue can be seen at the EU’s border with Turkey, a member of the European Customs Union, but not an EU member. HGV lorries entering the EU via the Turkish-Bulgarian border typically experience delays of 12 hours, while delays of 20 hours or more are not uncommon. Such delays are caused by the cumulative administration burden of all HGV drivers being required to declare what goods they are carrying and the origin of those goods.

If HGV drivers using the ferry at Dover, or the Eurotunnel at Folkestone, need to spend an additional two minutes each having paperwork checked, it would create thirty-mile tailbacks on roads leading to the ports, according to a survey by Imperial College London.

In Ireland, Dublin Port has already built additional customs facilities, including drive-by booths, covered vehicle inspection areas, and sheds where containerised goods can be unloaded, examined and reloaded.

For companies exporting to the European continent, there are alternatives to using the UK land bridge, that can help to avoid customs delays when entering and departing Britain. Cobelfret operate the world’s largest short-haul roll-on/roll-off ferry between Dublin and Antwerp.

 

Impacts for logistics

 

If you are exporting to the UK and not the continent, however, you must negotiate a way through Brexit delays, rather than trying to negotiate around them.

Just-in-time delivery is a common requirement in the construction industry, with penalties accruing if goods are not delivered on site within a pre-agreed timeframe, usually by a specified date. However, as no one knows exactly how long it will take a particular shipment to clear UK customs post-Brexit, exporters must build an additional margin for delays into estimated delivery times.

At the event, Ronan McDonnell of The Logistics Consultancy advised that those working under just-in -time constraints should consider investing in UK depots, where goods can be held temporarily before they are due for last mile delivery.

McDonnell noted that the effect of a delay entering a port can be amplified by restrictions on driver working hours. A haulier stuck in traffic for hours may be required to pull over and stop due to tachograph regulations. He suggested that Irish exporters could consider jointly investing in holding depots and sharing the additional cost burden.

The only way for Irish manufacturers to completely avoid export delays, said McDonnell, is to become UK manufacturers by building production facilities in Northern Ireland or Great Britain.

 

Customs Union dues

 

Outlining what could happen in a best-case scenario in which Britain stays in the European Customs Union, Donna Hemphill, a senior manager in Deloitte’s Global Trade Advisory division, said that Irish exporters will need to acquire an Economic Operators’ Registration and Identification (EORI) number before commencing exports with post-Brexit Britain.

Once exports commence, each shipment will need to be entered into the Irish Revenue Commissioner’s Automated Entry Processing (AEP) system, electronically filing single administrative documents (SADs) using the direct trader input (DTI) facility on the Revenue Online Service (ROS). More information can be found by downloading Revenue’s Guide to Customs Export Procedures [PDF].

Hemphill also recommended that exporters engage the services of a specialist freight forwarding and customs brokerage company to assist with sending goods to Britain as efficiently as possible. The paperwork involved can be substantial. An SAD alone contains 54 blank boxes that must be filled in.

In addition to the expense of hiring such a service, exporters should budget for the time required to provide necessary instructions to freight forwarders and customs brokers.

“Responsibility for making the correct customs declaration lies with the trader, not with the freight forwarder or customs broker,” added Hemphill. “And there are financial penalties for non-compliance.”

 

Becoming an Authorised Economic Operator

 

It is possible to speed up your passage through UK customs by becoming an Authorised Economic operator (AEO), but approved procedures and internal controls must be implemented to qualify for priority treatment.

If you have AEO certification, customs can carry out checks on your premises, to ensure your procedures and internal security systems are up to standard. A customs audit will require you to make disclosures about your business activity.

AEO status also offers additional benefits. It helps confirm you as a trusted trader with business partners. UK AEO status is recognised in other countries.

Another option to consider is establishing a customs warehouse in the UK, in which your goods are physically present in Britain, but have not yet cleared customs, and duty has not yet been paid on them. The chief advantage in this scenario relates to cash flow – you won’t need to pay duty on exports until the goods leave your warehouse for delivery to customers. Customs warehouses are subject to periodic inspection by HMRC and operators must demonstrate good warehouse management capability.

Whatever the outcome of Brexit may yet be, such issues are worth considering. The UK remains Ireland’s closest trading partner, and Irish goods will continue to find a market there.