The Manufacturer
“The complexity, lack of understanding and control within the supply chain has led to duplicate payments, overpayments, hidden costs and unacceptable levels of risk and compliance.”
If we were to ask a client how much it costs to clear their products through customs, they will typically respond with just the cost actually paid for “customs clearance”. When we ask what about all the additional costs, the response is a little less clear. What about customs duty, freight costs, export declarations, document handling, administration costs (and many more “add-on” charges) and are they in-keeping with the Incoterms?
When you take all these into account, the cost of an import declaration can quickly rise to three figures, eating away at profit margins.
A supply chain contains many costs that over time become lost, hidden or generally not known about. These costs can be even harder to identify when different manufacturing sites, operational personnel, warehouse managers etc. all have their own preferred way of doing business. If this is a multinational group, with intra group sales and movement of goods crossing borders, you can multiply this by two, three or four times.
A client’s concern
A client came to us with a concern that, having failed multiple HMRC control visits, they were not compliant within Europe (including the UK) and could we help. The key failing they had was that their supply chain had morphed so much over the years that they had lost sight and control of how it was being managed. The first hurdle we had to overcome was understanding what was being declared upon import.
The solution – C360 – Connecting Clarity and Control
Using our newly developed software, C360, we were able to provide the client with visibility over their imports. By identifying basic information, such as their customs duty liability, the number of import entries completed, who was responsible for the import entries, who the supplier was, which country were the goods dispatched from, what was their origin, how products were being classified, we could start to build up a picture of our client’s import footprint.
By utilising the data that customs use to perform an audit check, C360 allows the client to understand and interrogate the data, performing checks to ensure that the errors that the customs authorities were finding would not occur again.
A major weakness highlighted by HMRC was the inability of the client to be able to produce the supporting records. The client didn’t know who to turn to within the organisation and whether the import broker had ever sent through the full set of records. This is a problem we, as consultants come across far too often. It is not uncommon for freight and import brokers, to not automatically provide the final copies of the import entry.
This is where the project took a slightly different direction. Built within C360 is a separate module “The Vault”. This is essentially a searchable storage facility to retain those all-important import documents.
The results
What C360 highlighted was the sheer volume of the different freight and import agents being used for cross border movements.
There were over twenty different brokers being utilised, some nominated by the client, some nominated by the supplier and even some being nominated by the logistics service provider.
The client concluded that to improve compliance they needed to regain control of their relationships with the freight and import brokers. When we started to map out these relationships and started to enquire about the various charges it was apparent that there were a lot of charges that the client wasn’t aware of.
In one instance when we looked at the delivery terms being applied on a supply of goods from a subsidiary in mainland Europe, it transpired not only was the supplying company being charged for export and import clearance fees, but the importer was also being charged these fees. This was resulting in an overall import clearance fee in excess of £250 per entry.
Improved compliance and absolute savings
Whilst one aspect of the project was to implement a process of using C360 in order to drive improved compliance, the end result was to create efficiencies in their supply chain procurement with an approximate saving of £70,000 per annum on import clearance fees in the UK and well over €100,000 for Europe. Improved compliance was achieved by streamlining the number of freight agents and brokers in the UK and the EU, reducing the numbers by over 70%. Not only has this helped to make the associated costs transparent, a key benefit of this being the implementation of API’s with C360, so that all import documentation is automatically stored in one central “Vault”, every time an import clearance is effected.
One last comment, as a bi-product of this project and the implementation of a compliance process using C360, we were also able to identify overpayments of duty in excess of £170,000 in the UK and over €210,000 in the EU. 90% of which, with our help, has now been successfully refunded from the relevant Customs authorities. The remaining 10%, we follow on shortly.
As this shows, C360 is not UK centric, it has the capability to process data from anywhere in the EU, allowing multinational organisations improved compliance through hierarchical visibility across all of their jurisdictions, providing data analytics all combined with one central “Vault” to store all their import and customs documentation. This can be achieved in real time and can considerably reduce the hours spent manually auditing the whole process.
Bio
The author – Neil Sheppard
Neil Sheppard is a customs duty consultant and director of Customs Connect. Having worked in a number of large accountancy firms, Neil established Customs Connect to provide commercial and pragmatic customs duty advice with a focus on identifying savings and process efficiencies. Neil specialises in the classification of chemicals, working with EU and UK businesses, having identified absolute savings in the chemical sector of over £35m.