Burnside Eurocyl: Preparing well for Brexit, despite early effects

Carlow manufacturing firm, Burnside Eurocyl, felt the effects of Brexit as early as the referendum and has already made a myriad of changes big and small, to prepare for the January deadline. After a consultation with Enterprise Ireland, the company put together a team from various departments, to ensure that they are as ready as they can be.

 

Burnside Eurocyl is an independent company established in 1998 under the joint management of brothers Tom and Anthony Byrne. Based in the town of Carlow, the plant designs and manufactures hydraulic cylinders for mobile machinery such as excavators and road-building equipment.

 

Early impact

‘We experienced the effect of Brexit immediately after the referendum, when sterling dropped,’ says Tom. ‘It immediately affected our UK business out of Ireland.’

Sales to the UK account for about 11% of the company’s exports. When the value of sterling fell, the company had to increase their prices to compensate for this loss. There was serious concern that the price increases might drive customers elsewhere.

‘Thankfully the effects so far have not been too serious,’ adds Tom. But the company is nonetheless refocussing its sales efforts outside of the UK.

 

Hedging

The company has employed a number of other strategies to offset the effects of currency volatility.

‘We engage in currency hedging by buying & selling sterling forward where appropriate.’ Where possible, they have, for example, changed larger customers’ accounts from sterling to euro. On the supply side they have changed supplier accounts from euro to sterling in order to help offset the effects of exchange rates. Despite these efforts, Tom says, currency volatility and uncertainty about customs remain an ongoing concern for the company.

‘We bring some raw materials in from the UK. The good thing about that is that it at least helps to offset the sales problems created by the currency difference. It’s a way of hedging I suppose,’ says Tom.

 

Keeping informed

‘We’ve worked with Enterprise Ireland from the beginning,’ says Tom. Enterprise Ireland has provided funding for R&D, training and capital equipment over the years.

‘We have also participated in trade delegations and have used the services of Enterprise Ireland’s overseas offices when visiting customers.’

When it came to preparing for Brexit, the company drew on the resources provided by Enterprise Ireland. ‘We haven’t applied for any funding as yet,’ says Tom, ‘but we have been attending seminars and participating in discussion groups about how to deal with Brexit.’

A consultant from Enterprise Ireland visited the plant to provide an in-house consultation on strategic sourcing. ‘This was a great help for learning about all the new requirements on the purchasing side of things.’ The consultation helped management to start mapping their supply chain for potential Brexit effects.

Preparations

In order to prepare for Brexit, the company put together a team of staff members, from areas ranging from Administration to Logistics, to ensure that all the departments were aligned in addressing the various implications of the change.

‘There are a lot of customs details that needed to be worked out,’ Tom explains. ‘We’ve appointed our logistics partners as customs agents… we’ve added commodity codes to our products on our software system and invoices, and added incoterms to our invoices.’

‘We had to obtain our Economic Operators Registration and Identification (EORI) number, for example,’ explains Tom. This number is required for any economic operator outside the EU, doing business in the EU. Because the company trades and travels through the UK, the number will be needed after January. The process of obtaining the EORI number was neither time-consuming nor expensive. ‘It’s a one-off exercise, but once that’s done, it’s done.’

Like many Irish businesses, Burnside Eurocyl has applied for trusted trader status, to try to mitigate some of the delays that might be created at customs. The uncertainty about tariffs and duties could potentially cause delays to the movement of goods. So, the company has obtained a Trader Account Number, which will authorise them to defer payment of duties or tariffs and, hopefully, allow processes to run as smoothly as possible.

‘We have also engaged with our suppliers to ensure that they have their paperwork in order such as the EORI number and commodity codes.’

 

Transport routes

‘Transport is the largest potential pitfall from our point of view,’ says Tom. Burnside Eurocyl exports 95% of its produce to Europe, North America and Asia. ‘There will undoubtedly be extra documentation and costs in this area. We do foresee that there will be teething problems resulting in delays initially.’

The company transports goods to the continent via the UK, and this could potentially cause serious problems. Many anticipate substantial delays on this route after Brexit, with goods being stopped at customs posts.

Although Burnside Eurocyl products don’t have a short shelf life, the company deliver to many of their clients on a just-in-time basis. Any delays could have a very bad effect on their clients, with many having to pause production if the cylinders do not arrive on time.

‘We have spoken to our carriers about avoiding the UK land bridge for transit to the continent. They tell us that there is an option to avoid the UK and go the sea route if there are difficulties or delays. However, this is likely to be more expensive and have a longer transit time.’

For many sectors, tariffs are going to be a major cost after 1st January. For Eurocyl however, ‘it isn’t known as yet if there will be tariffs on our goods, and in the event that there are, the WTO tariff is relatively low at 2.7%. This is of course an unwelcome cost increase but hopefully we can counteract it by gaining efficiencies in the operation.’

Stocking up

‘We expect initial delays in deliveries to our customers,’ says Tom, ‘and to counteract this we plan to build extra stocks to cover customer demand. To minimise potential disruption in the supply chain we have increased our stock of raw materials and brought forward our supplies to cover any disruption during shipping.’

Although our Brexit preparation team has already made numerous changes in advance of Brexit, management knows they can’t prepare for every eventuality. ‘We’ve done a lot,’ says Tom, ‘but there’s still a lot to do before the deadline and we’ll continue to monitor developments.’

Get tailored advice from a consultant with the Brexit: Act On Initiative

Rising to the customs challenge after Brexit – the UK perspective

The UK’s trading relationship with Ireland and other EU member states will change fundamentally following Brexit.

At present, there is no real difference to an Irish company between selling goods to a buyer in Longford or London. However, Ireland is set to become a third country as far as the UK is concerned, and that changed status will require the same customs declarations and formalities required for exports to countries outside the EU. This will require companies to register for a customs Economic Operators Registration and Identification (EORI) number with Irish Revenue. This is the minimum customs requirement for trading with third countries.

But that’s just the start. Customs duties, changed rules on VAT, and lots of paperwork are also on the horizon.

 

Facilitating trade with third countries

Customs proceduresSome commentators have painted this as a kind of nightmare scenario for Irish exporters, but Chris Houghton, Managing Director of UK freight forwarder Freedom Logistics is quite sanguine.

“While we don’t know what will happen, there are contingencies in place,” he says. “We are already in the business of facilitating international trade. If in the future that means all EU countries will be third countries, the processes to deal with that already exist”.

The main issue for many companies will be the prospect of delays. “The thing about the EU is that most freight comes in and out by truck,” Houghton notes. “Because there are no borders and no customs clearance at present, the fear is the system will not be able to cope in future and that there will be delays. But, whatever happens, we will have a process to facilitate the continued movement of goods. There might be some physical delays at the outset, and it might not be as smooth and fast as we would like but I’m confident that we will address that quite quickly.”

 

Managing UK customs procedures

While there are changes on the way for UK customs declarations, he doesn’t believe these should be of great concern to Irish exporters. “The only thing we can say is that whatever happens we will be able to facilitate customs clearance in the same way as we always have for customers around the world. We already have processes in place to charge back customs duties and VAT to sellers and we have partners in Ireland to facilitate that.”

Another fear for Irish exporters is that their UK customers will require them to look after the payment of all duties and tariffs. This is known as the DDP (delivered duty paid) basis of shipment. “A UK customs broker or freight forwarder can pay the duties on behalf of the exporter and charge them back later. We already do this for customers outside the EU and we would be happy to extend credit to Irish companies if they approach us.”

Indeed, the service can go further than simply paying duties and VAT. “We have a customer in Australia, and we have registered them for VAT here in the UK and we store their products in our warehouse for onward sale to their UK customers. As far as the UK customer is concerned, they are buying from within this country and not importing.”

 

Engage with your logistics provider

He doesn’t advise Irish companies to get involved in setting up complex new systems to deal with possible changes which may or may not arise. “Most goods come in by truck and most of the exporters will have a relationship with a trucking company. Those companies will have arrangements in place to ensure that goods keep moving to and fro, so the first thing an exporter should do is talk to their trucking company. If they don’t have anything in place they should look to find a customs broker in the UK. The British International Freight Association (BIFA) has a list of members on its website (www.bifa.org). The UK customs broker will be able to arrange warehousing facilities and financial representation in the UK if required. Our job is to make trade as seamless as possible and we’ll continue to do that.”

 

Get your paperwork ready

There are some changes which exporters should start making straight away, however. “It’s not so much the customs process but the additional information required that could cause the problems,” Houghton points out. “The invoice is critically important, for example. It has to detail precisely

  • what is being sold
  • where it is coming from
  • where it is going to
  • who is selling it
  • who is buying it
  • the value

At the moment you simply put the goods on the truck and worry about the paperwork later. After Brexit, if you don’t have the paperwork on the truck it will be held up at customs until the information is available.”

 

Learn more about the dedicated supports to help Irish businesses build their customs capabilities:

Enterprise Ireland’s online Customs Insights course and the Clear Customs training for businesses who wish to process customs declarations in-house.