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Brexit Movement of Goods and the Supply Chain

brexit-movement-of-goods-and-the-supply-chain-pdf

SPECIAL TRADE COMMISSION

SPECIAL TRADE COMMISSION 9.3 The cost of administering containers is generally higher per unit of product than bulk raw materials, given the smaller volumes in a container and the relatively fixed nature of the costs. To that end, we illustrate both examples below: Example 1—Cost of Customs process for 11 containers of cane sugar imported from Mauritius on 16 November 2016 administered through a third-party external customs specialist During November 2016 eleven 20ft containers arrived from Mauritius at London Gateway container port. Each contained approximately 21 tonnes of speciality brown cane sugars, a total of 232 tonnes of sugar. For imports that take place at a port outside of our own refinery we employ the services of an external customs agent to manage the customs procedures. The correct shipment documents are sent to the agent in advance together with instructions for the customs process. This is done by our small in-house team of two people who manage all of our imports. Total costs of customs procedures for these 11 containers was a fixed cost of £37.50 for the Customs Entry levied by the customs agent, a Unique Consignment Number fee of £2.13 per container (£23.43 in total), and a presentation fee of £15.50. These costs are from time to time supplemented by one-off inspection costs that are levied if a container needs to be inspected for customs purposes. These are irregular and are generally between £50 to £100 per container. In this example our total customs cost was £76.43. This is equivalent to 33 pence per tonne of product imported, or 0.055% of the value of the product. The value of the consignment was €165,858 in total, or £139,500 at current exchange rates. £76.43 is 0.055% of that total consignment value. Regarding timing and delays due to customs processes, we cannot point to one example in the last ten years when an importation of containers has been held up by customs procedures. Provided the right paperwork and processes are in place the system has, for us, been seamless. Example 2—Cost of Customs process for annual imports of bulk raw cane sugar at our Thames Refinery We import around 600,000 tonnes of raw cane sugar annually direct to our Thames Refinery. We manage the customs process ourselves for all of these volumes. The process is managed by a small team of two full time people. These two people also administer all of the other elements of the raw sugar contract, including managing the shipping programme and arranging payment to suppliers. The total annual cost of that team is £110,000 including salaries and other employment costs. The value of the sugar itself varies with market conditions, but at current market prices would be around €320 million, or £270 million at current exchange rates. Attributing the whole cost of this team to customs processes would make the customs procedures cost the equivalent of 0.041% of the value of the product. Given the other roles of this team, the true cost is more likely 0.01% to 0.02% of the value of the product. 9.4 In conclusion, customs processes have a cost. It is naïve to claim that they don’t. But it is also important to have a clear and honest view of what those costs actually are. It is also critical to weigh them against the opportunities that exist outside of the EU Customs Union. 9.5 Our example is the experience of only one sector. But it is an experience that is quantifiable. Many businesses will never have traded outside the EU Customs Union and it is natural and understandable to fear the potential cost and complexity of customs processes. Our experience is that in reality they are a tiny cost of the total value of the business. And, provided that procedures are established and followed, in our experience customs processes have never held up our day to day operations. Customs processes and procedures simply do not register as a major business cost or practical risk for us, even though we are the largest importer of one of the most trade sensitive products to the EU. 26 |

SPECIAL TRADE COMMISSION CASE STUDY 10. THE ANZCERTA EXPERIENCE 10.1 Customs clearance between Australia and New Zealand (which do have a Free Trade Agreement but are not members of a customs union) is covered in the Australia New Zealand Closer Economic Relations Trade Agreement (“ANZCERTA”). The advantages of the ANZCERTA model are that it is not narrowly structured and has been able to evolve as the relationship between Australia and New Zealand has evolved. ANZCERTA started out as a bilateral commitment to eliminate tariffs, import licensing and quantitative restrictions but over time has also facilitated free trade in services and underpinned a range of cooperative and institutional arrangements; including mutual recognition and coordination of policy and administration. This latter aspect is particularly applicable to customs and border management and administration. | 27

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