UK trade: long-term customs filing strategies for exporters
Cost comparison

UK trade: long-term customs filing strategies for exporters

Exporters that have outsourced their UK customs filing to a customs broker or service provider may find self-filing to be more cost-efficient in the long run.

Evolving export support requirements

Especially in the first couple of months of 2021, outsourcing customs declarations was not such a bad idea. Incorrect or incomplete documentation caused long traffic jams and congestion at the UK border. Logistics service providers and customs agents had to solve these problems for their customers to ensure full compliance with all new customs procedures. Six months later, the situation is more stable. However, new potential issues at the border are on the horizon. As from October 2021 and January 2022 new import requirements will apply, when the remaining two phases of the Border Operating Model (BOM) go into effect.

Looking at the course of past and upcoming events, there is no single answer to the question whether outsourcing customs declarations is the right approach or not. The exporter’s benefit is determined by a combination of factors. Export and import volumes have a direct effect on cost, but delays in the supply chain due to additional, new import rules and requirements have financial consequences as well. Exporters that have already outsourced customs declarations can take even more factors into consideration. Their experience and knowledge gained during the first phase of the new trade relation roll-out is of utmost importance as well. Performance indicators and actual costs could make a difference between an outsourcing and self-filing model on the long term.

Self-filing vs. outsourcing: a cost comparison

Whether self-filing is more cost-efficient than outsourcing to a customs broker depends on the number and nature of the shipments. A customs broker charges € 18 to € 35 on average for an export shipment and € 65 to € 90 for an import shipment. Customs brokers determine their pricing based on the total number of declarations and the number of line-items per declaration. Furthermore, extra costs are incurred when the type of shipped goods requires additional documents or process steps, which is the case, for example, for excise goods, fruit/vegetables, or dual-use goods.

Estimating the costs of outsourcing to a logistics service provider is more difficult. Most logistics service providers include the costs for customs declarations in a discounted all-inclusive rate, so there is no transparency on the breakdown of total costs.

Exporters that plan to take care of customs declarations themselves will have to invest in staff with customs expertise. In this scenario, labor costs can quickly add up to € 75,000 per employee per year. The other important cost element is software. Integrating a customs filing solution with the exporter’s ERP system is key, otherwise a lot of time of the costly workforce will be wasted on manual data processing. However, keep in mind that outsourcing also requires employees to exchange data with the customs broker.

Now which scenario is the most cost-efficient? Let’s look at a calculation example in which a company files 2,000 export declarations and 2,000 import declarations per year. Two full-time employees are required to process these volumes. Annual cost of labor: € 150,000. If we add the cost of a software solution for processing import and export declarations, the total sum is € 172,782 per year.

Outsourcing to a customs broker leads to a significantly higher cost of € 247,500 though.
In this example, it is more cost-efficient to set up an in-house customs department.

Table: customs management cost comparison example for EU-UK trade
Table: customs management cost comparison example for EU-UK trade

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The full scope of benchmarking

Obviously, cost is just one factor to take into consideration. Even if self-filing is more cost-efficient option, the key benefits of outsourcing could be of higher importance.

Outsourcing to a logistics service provider can be interesting if the company has already hired a service provider for storage and/or transportation to the UK. If handling customs declarations is integrated with other logistics services, this will reduce the risk of delays in the flow of goods. For companies with time-critical shipments, this can be a decisive factor.
What’s more? Outsourcing means that exporters only need to hire one external partner for the complete handling of the goods flows to the UK. As a result, there is only one point of contact, one invoice with an all-in-one price, and only one party that has access to sensitive company shipment and customer data.

Looking at this scenario from the other perspective, there is also a potential risk of efficiency-loss.
A logistics service provider mainly understands logistics. The handling of customs formalities is not their core business, but rather an additional activity that enables them to offer shippers a complete package of services. The question is how far the logistics service provider's knowledge of customs formalities and tariffs extends.

Customs brokers will handle customs declarations professionally and adequately, even if they become more complex. For example, when shipments contain excise goods, dual-use goods, or flowers and/or plants which requires extra handling. However, working with a customs broker results in an extra link in the logistics chain. This will require more data exchange and extra lead time.

Making better decisions together – talk to an expert

Each exporter has their own challenges and needs to determine their own long-term customs filing strategy individually. The international customs experts at AEB can help to draw a full picture of the current and future export requirements. Secure a profitable future in international trade – get in touch with us today.