UK logistics operators are being urged to view the forthcoming new European Union legislation for Customs procedures as an opportunity to get ahead of the competition, rather than a hindrance and another bureaucratic hoop to jump through.
Langdon Systems, which has over 30 years' experience in supplying Customs expertise and technology in a wide range of sectors, says that becoming an Authorised Economic Operator (AEO) will drive profitability by setting organisations apart from competitors, demonstrating that they meet important Customs criteria which will reduce the lead time of goods flowing through the supply chain.
AEO status is the cornerstone of the new Union Customs Code (UCC) which takes effect from May 1 2016 and is intended to standardise the movement of trade across EU member states, simplifying Customs rules and improving security and safety of both inwards and outwards goods.
Companies may still be uncertain about how to implement the impending changes, or are even unaware, of the EU legislation for goods passing through Customs procedures, which could have a direct financial impact on how they do business.
Businesses also need to be aware that significant trading partners with the EU have adopted, or are developing, an equivalent standard and some firms, in particular those based in the US, are choosing not to associate with suppliers that don't have AEO accreditation.
Being AEO compliant will apply to anyone involved in the supply chain that carries out customs related activities including importers, exporters, carriers, logistics, freight, most manufacturers and many more. Failure to meet with the new conditions of the UCC and the AEO scheme could damage supply chains in vital economic areas.
While most freight forwarders, transport companies and warehouse owners involved in importing and exporting goods often have little experience of what the new legislation entails, there is expertise available that will fully address these challenges.
Contrary to popular belief UK manufacturing still plays a vital role in the nation's economy and is the 11th largest in the world. Anything that holds up production line processes through delays at Customs or incurs financial penalties will have an adverse effect on sectors such as vehicle manufacturing, oil and gas, the aerospace industry, chemicals and pharmaceuticals.
For instance failure to operate to AEO standard will impact on the nation's thriving car making industry. According to the Society of Motor Manufacturers and Traders Limited (SMMT) there are around 2,350 companies in the UK automotive supply chain, typically generating about £4.8billion of business annually. It is estimated that 80% of all component types required for vehicle assembly operations can be procured by UK suppliers.
Financial penalties and restrictions imposed on goods are the downside for those not compliant, but on the flip side of what may be perceived as an imposition for many companies is the competitive advantage by having the correct accreditation in place, which is why they should be seeking support from Customs specialists.
Langdon Systems estimates that of the 196,000 UK businesses involved in logistics currently less than 400 are AEO authorised, well behind their main European competitors like Germany which has in excess of 11,000.
As Langdon Systems' Customs Manager, Dave Bradbury, explains blue chip companies are already getting twitchy about the AEO status of suppliers and third party providers of services ahead of the deadline in May 2016.
He said: "Many multi-nationals are asking their transport and logistics suppliers if they have AEO status to ensure they are entrusting their goods in a secure supply chain with the highest standards. I'm sure that as the deadline for compliance approaches larger companies are going to be asking questions about the AEO status of those involved in their supply chains.
"What we are advising is don't leave it too late to become AEO accredited. If you haven't submitted your application by the end of 2015 you certainly won't be authorised by the 1st of May deadline when UCC is enforced. Time is running out.
"AEO status will become a necessity for many businesses trading internationally. As well as the financial implications, failure to attain AEO status will result in delays of release for all goods from a Customs Procedure and the possibility of lengthy ones where further scrutiny/examination is required. It is important therefore that those providing logistics services are aware of the implications and impact on them when dealing with businesses authorized for Customs activities."
Each company's AEO requirement may be different dependent on where they sit in the supply chain but the focus should be on mitigating risk and securing Customs processes by ensuring the standard is met, which should be viewed as an opportunity and can provide cost savings.
An AEO certificate is an internationally-recognised quality mark demonstrating that a company's role in the supply chain is secure with Customs controls and procedures, which are efficient and compliant. Businesses with accreditation get quicker access to some simplified customs procedures and, in some cases, the right to 'fast-track' shipments through certain HMRC safety and security procedures.
Mr Bradbury added: "Around 40% of Langdon Systems' existing client base has already taken advantage of our AEO programme for their Customs and logistics operations and the company is currently rolling out the offering to non-clients to help firms avoid the pitfalls of not being accredited, including withdrawal of existing Customs Authorisations."
In an environment in which industry is increasingly targeted, compliance and assurance for legitimate business is paramount. Prevention of exposure to fraud, financial difficulties and possible legal action is essential.