Prepared for Brexit?

Brexit Update 22/03/2021

Rules of Origin Requirements

We previously shared that to benefit from the UK-EU trade deal and zero tariffs' goods must meet the UK-EU rules of preferential origin, as stipulated by the Free Trade Agreement (FTA). Since these rules came into place, we have seen many disparities in duties and taxes being applied coupled with queries and questions from our clients.

As these country-of-origin rules in the FTA appear more complex than initially expected, we have sought some independent professional advice to support our clients.

The European Commission recently issued this guidance which is specifically intended for companies operating from distribution centres located in the UK which receive goods manufactured in the EU and then send those goods back to EU destinations.

Specifically, this guidance confirms that goods that originate in the EU but are exported to the UK and released into free circulation and then re-shipped to the EU cannot benefit under the UK-EU FTA preferences and duties are applicable. We have since had this independently verified and EU-originating goods that undergo minimal or no processing in the UK and are then re-exported from UK and imported into the EU cannot claim preferential (0%) duty rate, as the goods are neither Union Goods nor of UK origin.

We advise that all our clients seek their own independent advice but given some of the challenges and complexities we know our clients have been facing we wanted to share this guidance with you as soon as possible.

ILG Poland - Opening May 2021

We appreciate that many of our clients are being adversely impacted by the consequences of Brexit. As such we want to re-affirm that we are on track to open our first site in mainland Europe, in Wroclaw, Poland. The fit out on this 50,000 sq. ft is well underway with the first ILG clients go live in this facility in the first week of May 2021.

We have recently been advised that Poland has removed the requirement for UK businesses with Polish VAT registrations to appoint a Fiscal Representative. This should make it simpler for UK companies wishing to store and distribute goods from Poland to set up and begin operations.

ILG remain committed to helping our clients mitigate the impacts of Brexit and the rules of origin for our clients. If you do want to explore moving your European fulfilment to our new Poland site, please reach out to the team via brexit@ilguk.com where we will be happy to provide a full quotation and proposal.

We have several implementation openings for this summer into this facility so if you are adversely being impacted by Brexit, please reach out to us and we are here to help.

We appreciate that this continues to be stressful time and we thank you for your patience whilst we and our carriers work through the changes. Should you have any questions, please do not hesitate to contact me directly, your usual ILG contact or the team through brexit@ilguk.com.

UPS Service Extensions

Since the Brexit transition our Partner Carriers have continued to deal with unprecedented volumes whilst trying to maintain services to all European Destinations. There have been challenges along the way, but I am confident that the volumes are starting to ease, and we should hopefully see an improvement on lead times to the EU albeit under a customs pending remit. I hope that any challenges you have faced have been rectified and I would happily welcome feedback around what is now working for you but more importantly what challenges remain daily.

Throughout February we have committed to speaking with our carriers every day to ensure we remain on top of any service issues and disruption so we can act if needs be. Thankfully, the vast majority of these meetings have been short, but we have today been advised by UPS that they will continue to relax service commitments to key destinations into Europe.

UPS have now extended their +1 day Standard peak relax for deliveries in certain countries (Italy, United Kingdom, Belgium, Ireland, Germany), until Easter Sunday 4th April for Domestic and Standard road shipments.

To allow the necessary time to clear current backlogs, UPS have announced they will continue to relax the delivery time commitments from the UK to the following countries until further notice, for both Standard and Express shipments:

• +5 additional days to Greece, Hungary, Poland and Spain
• +3 additional days to Romania and Portugal

We apologise for the obvious disruption this will cause to you and your clients and appreciate your understanding as this situation is beyond the control of ILG. If this is due to have an impact on your shipping please do not hesitate to contact your Customer Relationship Manager or the team on brexit@ilguk.com so we can look at alternatives for you.

Brexit Update: DHL Suspension of Services to Germany

Further to our previous update on the Brexit situation, please see below the latest information:

• The DPD EU Road Service remains available to all EU destinations. We have been informed of certain restricted commodities that cannot be carried in DPD’s network which you can view by clicking here. Please note that currently DPD requires a commodity code in an 8-digit format at line-level to be able to process a shipment and have validation, so make sure this field is completed. If you are a delivery customer, please check that this is provided at a line-level at the time of booking. If you are a fulfilment customer, please ensure that we have been provided with this information at a line-level and in 8-digit format to enable you to use this service.
• We are seeing a number of customers send us orders with missing line values for international destinations. This is causing delays as customs now require all orders to include a value at line-level. As such, if you use the ILG Warehouse Management System, we have deployed a system change which, if an order imports without either a header or line value, the order will be moved to a 'held' stage. Any orders with missing values will then appear on your held-order report with the category 'Line Value Zero on Order'. For us to release the order for shipment, we would then require you to confirm the line value of every item on the order to your usual ILG contact. If you would like us to set up a held-order report or amend the recipients of an existing report, please alert your usual ILG contact.
• As of close of play Friday 22nd January 2021, we have been advised that DHL Express is suspending all air and road services to Germany with immediate effect for a period of 4-6 weeks as its network readjusts. DHL is dealing with specific challenges in Germany, with freight backlogs and delays in its German hubs caused by incomplete or inaccurate customs data. We will move to route your volume via either UPS or DPD on a least-cost basis, providing we have adequate commodity code information in an 8-digit format for shipments to this destination.

More broadly, our teams are now seeing some significant challenges in the movement of goods between the UK and Europe as a direct consequence of the changes brought about by Brexit. The wider impacts on the industry are creating an incredibly fluid situation and we cannot rule out other service suspensions by our carriage providers imposed at short notice. Should this be the case, we will keep you informed via email and provide as much prior warning as possible.

Our teams are working tirelessly to keep your shipments moving, but we are dealing with a significant increase in queries which is impacting our response times and we are attempting to resolve queries with an associated deadline as a priority.

IMPORTANT: Brexit Update

ILG remains committed to helping our customers mitigate the impact of Brexit, but we and our carriers are now seeing a particularly challenging situation regarding shipping to the EU, especially on a DAP basis. Our teams are dealing with a significantly higher number of queries across the business, which is affecting our response times and causing us to prioritise our responses carefully.

We ask our customers to urgently review the impact of these challenges, which are a direct consequence of Brexit.

Please see the following specific updates:

• The new trade deal only applies to customs duties, meaning that in many cases customs duties will not be applied to goods fulfilling all necessary "rules of origin" requirements. However, import VAT will still be levied at the importing country's prevailing VAT rate. Therefore, customs declarations are required for goods to clear the border, as the UK has left the single market and the customs union.
• Rules of origin requirements. To benefit from the UK-EU trade deal and zero tariffs, it is essential that you provide evidence of the country of origin in the customs declaration. To qualify under the trade agreement, goods will have to be of UK or EU origin. This means they must meet the UK-EU preferential rules of origin. If you are an ILG fulfilment customer, you should have already provided us with these at a SKU level. If you are an ILG delivery customer, please include the country of origin when booking your jobs.
• There are a number of restrictions on some products to selected destinations. As the shipper of the goods, it is your responsibility to ensure that goods can be accepted into a destination. If they cannot and are restricted, they will be returned to the shipper at cost. Please access our guide to products and destinations by clicking here.

Update on revised costs for shipping on a DAP and DDU Service:

For DAP shipments:

On a DAP basis, duty and taxes are the responsibility of the receiver. They will be contacted by the courier and required to pay any duty/tax prior to the shipment being delivered.

All DAP shipments are subject to the below customs clearance fees:

The receiver is then responsible for paying the duty and import VAT to the carrier before delivery can take place.

It has recently come to light that each carrier levies a disbursement fee in addition to the duty and tax. This disbursement fee is charged due to the carriers pre-paying the duty and tax payable and acts as an administration fee. This is an extra cost which the receiver is required to pay in addition to the outstanding duty and tax. Since 1st January 2021, we have seen many receivers refuse these charges on shipments sent with DAP terms.

We have set out here the relevant disbursement charges per country to give you an idea of what the receiver is being asked to pay upon import. Carriers also charge VAT on disbursement fees.

Please note that the application of duty and tax on a DAP service is a direct transaction between the receiver and the carrier. As such, in the instance that the receiver disagrees with the charge being levied, the onus is on the receiver to dispute the charges locally. If this situation does arise, ILG will do all it can to assist.

For DDP shipments:

On a DDP basis, duty and taxes are the responsibility of the seller. For DDP shipments, duty is paid in advance by our carriers, billed to ILG and then passed back to you.

The charges for shipments sent from the UK to EU on a DDP basis are below:

1. The Export Customs Clearance Fee as with DDU shipments:

2.The DDP accessorial fee listed below:

3. The duty and tax amount.

4. An ILG arrangement fee, which is set at 3% with a minimum charge of £5.00 per invoice and up to a maximum charge of £250.00 per invoice.

It is worth noting that, should you decide to send on a DDP basis, the disbursement fee alluded to earlier is not applicable. However, you would be charged a DDP administration fee as you have opted to prepay the customs charges.

In addition, we ask that you urgently review the below if you haven't already done so:

• Have you sent us your GB and XI EORI?
• If you are a fulfilment customer, have you sent us your commodity codes and country of origin so we can update our product master database?
• If you are a delivery customer, are you including commodity codes and country of origin information on shipments?
• Please let us know which incoterms you wish to use for EU shipments.

Unless instructed otherwise, ILG will send all shipments on a DAP basis.

If you are unsure about any of the above, please tell us as soon as possible.

We are receiving daily updates from our partner carriers and will notify our customers of any potential changes.

If you have any questions, please reach out to any member of the ILG team or contact us at brexit@ilguk.com