Ready for anything
On 29 March 2019 the Brexit will become a reality. Until that time the European Union and the United Kingdom will be engaged in complex negotiations whose outcome is uncertain. But whatever the end result, Dutch Customs is not just patiently standing by and waiting for whatever is coming. The administration has estimated that EU cross-border traffic will increase by about 25 percent after the UK’s exit. Three Customs officials shed light on the consequences for both Customs and the business world.
No one dares to say exactly how the cards will be shuffled a year and a half from now. One thing, however, is clear as day, according to Jeffrey van Slobbe, deputy director Enforcement Policy and International Affairs. “When you look at all the possible scenarios in the published negotiation mandates of the two parties then you see far-reaching consequences for Customs. All kinds of more or less traditional variants are in circulation, including free trade agreements and bilateral treaties. However, these are not relevant from a Customs’ perspective: based on current volumes of trade we can see that the formalities around cross-border traffic alone will increase by about a quarter. That’s a very conservative estimate, because you can never predict how the economy will react in the future when a wall has been put up between Britain and the EU. Incidentally, the consequences won’t only be enormous for our service; a substantial portion of the business community will have to deal with new customs requirements.”
A clear message
This analysis is an important instrument for conducting a dialogue with the market, observes Roel van ’t Veld, policy officer in European risk management. “It’s a real wake-up call for businesses. If you’re just coasting along on the idea that we’ll come up with some kind of temporary arrangement, you might get an unpleasant surprise on the 29th of March 2019. That’s why in our recent meeting with ferry operators we really tried to get them to take in the fact that no matter what the outcome of the negotiations, a lot of changes are coming to their sector. That clear message – you guys need to be really well prepared – was greatly appreciated.”
“Right now it doesn’t matter if you’re doing business with London or some dinky Dutch town in the middle of nowhere”, Van Slobbe says. “But that’s going to change later on. Partially for that reason we’ve been meeting with trade association. Luckily, they see an important role reserved for themselves, just as the Chamber of Commerce does. Customs doesn’t teach companies how to do their declarations correctly. Obviously we inform them about our procedures, but not about the changes per se. An import declaration is an import declaration, and an export declaration is an export declaration. Look, it doesn’t make much of a difference for a terminal if a container arrives from an England that’s operating within the EU or outside it – they’ve got everything all arranged. But there are also companies whose main business is with the UK. Right now it’s simply a question of delivering the goods and sending an invoice. After Brexit there will be all kinds of customs requirements. They’re going to have to bring in the know-how, train people, hire services, reorganise their accounting department…”
Van ’t Veld: “Big companies with their own customs departments will be well positioned to accommodate the Brexit changes; but some of the smaller players might not make it. On the other hand, the new situation will also create new opportunities. Businesses who are now dependent on British suppliers will go in search of alternatives within the EU.”
The Brexit is also going to impact the supply chain, Van ’t Veld continues: “The free flow of goods within Europe enables logistical speed. Companies have to work this out for themselves early on: will the Brexit mean that I have to adjust my logistical processes and trade patterns? The supply chain of the automotive industry for example runs through the entire EU. Goods are regularly being sent back and forth between the UK and the Continent, and at each step of the way something is being altered or added to the final product. Just-in-time delivery won’t be possible any more in the future, and we haven’t even mentioned the levies on goods.”
“That’s why companies have to get going on this”, in the opinion of advisor Kees Beaufort. Even if the impact will differ greatly by country. “The Brexit is highly relevant to Dutch Customs because the UK happens to be one of the most important economic partners of this country. Along with France, Belgium and Ireland, we make up the top group within the EU when it comes to direct commercial trade. But at the same time we have to realise that customs requirements form only one topic within the complete package of negotiations, and possibly not always the most important one. What can’t be predicted is what possible variants of those currently discussed by the UK and EU they might come up with. Moreover the repercussions of a break up of the EU for Customs will probably only be up for discussion in the negotiations in the second quarter of 2018. And we have no reason to expect certainty about the results much before the deadline in 2019. Officially the European Commission has this planned for October 2018 so that there will be enough time to implement the results at the national level and, for example, finalise any potential trade agreements before the deadline.”
Van Slobbe: “Given the complex nature of the negotiations and the different Brexit scenarios that is a very optimistic plan. No commercial trade agreement was ever created in less than twelve months, the average is between seven and ten years. And then we haven’t even mentioned any possible transition period, which the Brits are calling for. If such a thing is implemented, the deadline will be postponed, but until when? That’s another reason why we are so occupied with the consequences of the Brexit internally, and why we have to take different scenarios into consideration.”
No matter what the outcome, not just the business community but Customs itself will have to get up to speed, Van ’t Veld asserts. “It’s not only the volume of trade entailing formalities that will increase, we’re going to have to deal with different procedures too. Overseeing the ferry traffic between the Netherlands and England will be new for us. For example, we don’t yet have an office in Hoek van Holland. There isn’t a building there where we can carry out our checks, no link to the customs system, nothing. Even though the Netherlands is number two in the EU with regard to passanger traffic, right after France. And in trailer transportation we are the biggest. In addition, the Brexit will have consequences for our customer management. In the Netherlands there are nearly 5,000 VAT numbers with a turnover of more than 100,000 Euros directed at the UK. It’s those businesses’ clients that we likely need to enter into discussion with. In brief: the growth of cross-border traffic by 25 percent demands more customs supervision, and therefore also more capacity.”
“But we also have to investigate how we can set up our supervision and system of formalities as smart as possible”, Van Slobbe adds. “As far as ferry traffic goes: you can put an office with a man and a barrier gate in the harbour, or you can figure out how to set up a really efficient and innovative control system in collaboration with operators. Ultimately we’d like to see a solution that works as smoothly as possible for both the Dutch business community and the government authorities. But that it will be a very busy time for all the parties involved must be clear by now.”
Agreement nowhere in sight
This August the UK published a position paper on future customs relations between Britain and the EU. It contains a number of proposals aimed at softening the impact of the Brexit on customs, such as a transition period with a temporary customs union. Because the negotiations aren’t public, the formal response of the EU is not known. The EU officials responsible have made critical statements about this proposal in the media.
The topic of customs requirements seems to have received a higher place on the agenda of the Brexit negotiations because of this. However an agreement is nowhere in sight. It thus remains of the utmost importance to be well prepared for 29 March 2019.