Re-moving Barriers in Supply Chain

At a moment where Brexit talks reached a first breakthrough, the Cluster for Logistics held its bi-annual conference "Moving Barriers in Supply Chain" on November 15th 2018 at the Chamber of Commerce. The challenges and opportunities regarding the new relation between UK and EU, trade tariffs, protectionism and legislative issues affecting trade were the main topics of the second yearly C4L conference.

Over 100 guests attended the 12th Luxembourg Logistics Conference a day after a first agreement had been reached by the UK and the EU. The programme included a keynote speech from the British Ambassador to Luxembourg, H.E. John Marshall.

Mr Carlo Thelen, Director General of the Chamber of Commerce and president of the Cluster for Logistics, noted that while the conference was about barriers, that impact growth and prosperity, the participants would insist on how to overcome them. Mr Thelen spoke of the potential impact of Brexit for logistics and transport companies. It is likely that longer waiting times at the borders and administrative procedures will complicate the lives of the companies. It is less sure on how it will impact industrial production and reduce bilateral trade. The insecurity is one of the major issues regarding Brexit and companies need to take precautions, as growth figures are lowered for EU and US as well as emerging countries.

The topic is crucial for UK and Luxembourg alike and the Cluster for Logistics was glad to welcome H.E. John Marshall who admitted that the Cluster’s timing was certainly interesting. The ambassador gave an overview of the first agreement reached on November 14th 2018. Mr Marshall spoke of a new deep and special partnership but negotiations would have to continue to achieve a full declaration. Both sides are determined to conclude the full political declaration end of November and the final deal has to be voted and ratified by the UK and EU parliaments.

The ambassador defended Prime Minister Theresa May and was optimistic about the outcome, even if the amended agreement will have to receive legal approval in two to three months rather than the usual nine to twelve. According to the ambassador, the new framework would create a fair balance and allow both sides to continue business with frictionless borders and a new free trade zone.

The insecurity remains until the next steps are taken. Many European companies have assumed a Hard Brexit Strategy and despite this first negotiation breakthrough will remain so at the time being, according to certain speakers.

The speakers panel included experts on Legislation, VAT and transport to UK. (The presentations can be downloaded below)

Mr Tom Verbrugge, Senior Director, Global Trade Advisory at Deloitte gave a general overview on Brexit, global trade agreements and US trade barriers. With the example of the CETA agreement between Canada and Europe, Mr Verbrugge showed the different characteristics of a free trade agreement, that includes plenty of derogations. Historically, bilateral free trade agreements take a lot of time to be worked out, warns Mr Verbrugge. In the case of CETA, it took 9 years. The partnership presents a huge opportunity for companies but in order to benefit from the free trade procedure it is mandatory to prove the origin of most products.

A post-Brexit trade agreement with UK is not to be expected soon if no agreement is found until 9th March 2019. A hard Brexit would generate practical problems for companies that rely on intracommunity trade. Mr Verbrugge spoke of 20.000 companies in Belgium that are not yet exposed to any customs clearance procedures and would have to adapt quickly. Also, popular goods from the mainland like frozen food are usually heavily tariffed, warns Mr Verbrugge.

Globalization and free trade are however under scrutiny by “America First”. USA are currently using trade tariffs to take profit of existing agreements. The US parliament is about to vote a kind of NAFTA 2.0 to strengthen certain American sectors.

Legislative incoherence can be a hindrance to free trade. In order to create a center of excellence in logistics, Luxembourg could elaborate standardized logistics contracts, which would cover the different activities of the supply chain, says Maître Anne Paul, expert in transport law and active in Luxembourg and France. Unlike Luxembourg, which does not have a specialized law, transport laws exist in France but they fall short of taking in account the many aspects of logistics. A revision in France is proving to be complicated and Maître Paul sees an opportunity for Luxembourg to elaborate a modern legal basis which later could include blockchain and data digitalization.

VAT Barriers mostly result from an VAT environment from the 90’s, said Mrs Karine Bellony, founding partner of VAT Solutions. The first rules were introduced in 1967 and have been adapted every 10 to 15 years via European directives but are not ready for modern e-commerce. VAT customs procedures prove to be a fountain of exceptions. Mrs Bellony gave a concise overview on how rules are different for private and business clients or intra- and extra-EU trade. As an example, items below 22 Euro from outside of EU are VAT exempt when being ordered for personal use. Starting 2021, the directive will be modernised for e-commerce and simplified with a centralized register for online sellers - and the 22 Euro exemption for non-EU goods will be abolished as well, influencing goods imported from China.

Stremler AG gave a short insight in ICT programmes that are capable to reduce barriers in line with industry production. As modern production lines become more complex, new realtime solutions need to be included in the supply chain, says Mrs Stephanie Stremler. A dedicated conference on Logistics and Industry 4.0 Solutions will be held on November 29th, in cooperation with C4L.

Mr Jason Breakwell, Commercial Director at Wallenborn Transports presented his view on Brexit and how it will impact trade between our countries. As a UK national working in the transport sector, he is strongly impacted by Brexit and gave a very personal presentation. The practical impact just on customs declarations will be massive, and neither the UK nor the EU ports are able to cope with it soon. Quoting from a UK whitepaper, business leaders expect that customs declarations would increase from about 90 million to 390 million customs declarations a year by 2019 if EU goods movements are classed in the same way as imports and exports from third countries. 

CLdN RoRo is doing a large part of its business with transports between Mainland EU, UK and Ireland. Lorries, containers and automotive. Mr Michel Cigrang, Director CLdN RoRo SA thinks that Brexit could be a push for multimodal solutions. The potential longer waiting times will put pressure on hauliers and Mr Cigrang expects a move from accompanied to non-accompanied transport due to Brexit to reduce the number of needed truckers of different nationalities, already rare.

Mr Malik Zeniti, director of C4L, and Mrs Mélanie Laidié, Deputy Manager, presented the future projects of the Cluster and closed the conference that was followed by a sponsored networking drink.

The Cluster thanks the Sponsors and Partners of the event, Stremler (Gold Sponsor), Cargolux (Silver Sponsor) and the Chamber of Commerce.