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Kjell Bornkamp
Product Manager
Amber Road


Supply Chain Comment

Kjell Bornkamp
Product Manager
Amber Road


For more information, please visit http://www.amberroad.com

July 11, 2019

Streamlining the Movement of Goods in the EU


Adopting the Appropriate Technology Offers Unique Advantages to Manage Future Challenges in Delivering Inventory

 

Global companies are experiencing unprecedented levels of trade uncertainty, disagreement and confusion caused by escalating tariffs and re-negotiated trade agreements. These disruptions are especially acute across the European Union where the United Kingdom, Europe’s second largest economy (and the world’s sixth largest) has committed to withdrawing from the Union by late 2019.

 

Bornkamp Says...

Through automation, companies can focus on delivering their inventory faster and at a lower cost while remaining compliant with the complex world of trade regulations. 

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As the political landscape in Western Europe continues to change, the Eastern European economy has been flourishing in recent years, causing wages to rise and e-commerce to grow. As businesses are dealing with the anticipated impacts of Brexit, countries such as Poland, Hungary and Romania are stockpiling more and more products. Products destined for Central and Eastern Europe continue to be routed through European gateway ports such as Rotterdam, Antwerp and Hamburg due simply to the infrastructure, facilities and capacity of these ports. This ultimately places more pressure on the entire supply chain and available inventory of businesses delivering products all across Europe.

 

While businesses are facing these growing volumes of products, European consumers expect to receive products faster and cheaper than ever. As companies consider the potential delays and to-be-defined customs procedures on the EU-UK border, they must continue to assess the risks and impacts of a changing supply chain. The prospect of the diverse set of risks in operating their business and managing inventory raises the imminent question of how the enterprise can effectively continue to finance and distribute inventory within the European continent.

 

While the renegotiation of the UK–EU relationship will most likely take several years, European distributors can’t afford to wait that long to assess their current inventory management if they want to mitigate future disruptions. To serve the entire European market effectively, it’s vital that companies manage the availability and allocation of inventory to reduce overall costs, improve cash flows and bring more agility to supply chain operations.

When companies bring inventory into Europe, customs warehouses enable them to defer duty payments until products are actually imported to EU member states or else exported to countries bordering the European Union. Identifying potential duty savings through free trade agreements and preferential duty rates is the first step before importing goods into the EU. Many customs warehouse operators still utilize the first-in, first-out (FIFO) method. However, to qualify for a duty reduction, you need to prioritize the export of products sourced from suppliers with preferential treatment, even if those weren’t the first products in. Those products might enter at a lower duty rate compared to the same product imported from a country with a non-preferential treatment.  

The next step is to digitize and automate the reporting of the inventory that moves into and out of the European Union. The Customs authorities expect accurate tracking of bonded and non-bonded inventory.  Bonded inventory must be reported each time it is released from a customs warehouse. Due to the increase of trade volumes, a growing number of traders are utilizing aggregated month-end declarations to lower the costs of the customs processes. Many customs authorities within Europe are looking for ways to make these types of declarations more accessible for trusted traders.

Lastly, companies need to orchestrate inventory flows to ensure that the business can adapt to changes in trade regulations or business strategy. They can do this by redefining the processes they use for inventory, distribution and reporting. Companies can also reduce the inefficiencies that might exist in cross-border transactions by proactively managing the various trade flows and identifying necessary compliance data and activities in advance. Integration of data and automation plays a major part in reducing the inefficiencies of manual data entry or data replication.

When companies import products into Europe for storage, distribution or manufacturing, they lose significant amounts of capital each year if they pay duties and taxes upfront—even if they later recover those fees upon export. That’s because, when funds are tied up in pre-payments, companies lose the chance to invest those funds in profit-generating activities. Companies can defer these duty and tax payments, but to qualify for deferrals, they need to be able to give EU customs agencies complete, granular visibility into the inventory they’re moving into and out of the bonded warehouse. That task is monumental—in time, cost and compliance risk—when not using a technology solution that can automate the process across Europe and provide a single visibility stream. Failing to manage these complexities effectively will increase the costs of customs clearance processes and can even put trading privileges at risk.

 

Adopting the appropriate technology offers unique advantages to manage future challenges in delivering inventory. Customs Warehousing and European Customs Filing programs enable businesses to define or reconfigure their supply chain based on changes to the business or realignment with requirements of the various government authorities.  Through automation, companies can focus on delivering their inventory faster and at a lower cost while remaining compliant with the complex world of trade regulations. This also helps them stay prepared for the next storm in the world of global trade.




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