The Malta Independent 24 April 2019, Wednesday

Brexit: Problems will find their own solutions – Franco Azzopardi

Jeremy Micallef Monday, 4 March 2019, 10:30 Last update: about 3 months ago

With the potential for a Brexit deal no more likely than a no-deal Brexit, businesses are scrambling to prepare themselves for any potential difficulty that comes their way. Jeremy Micallef speaks with Chairman and CEO of Express Trailers, Franco Azzopardi, on Brexit and what the future landscape may look like.

What is the current situation for the freighting industry?

At Express Trailers, and probably many other logistics companies that handle customs documentation or any documentation that shipments entail, we are all equipped, and we are definitely equipped to handle non-EU cargo because we've been doing it since inception.

Adding another country will be adding a dosage.

I strongly believe that our set-up is equipped for the eventuality that we will need to start treating UK cargo as non-EU cargo.

 

And this will be in the case of a No-Deal Brexit?

In the case of No-Deal, and in the case of there being a deal and, somehow, it would work out that way.

On the other hand, as a country, people who have strong ties with the UK market, I'm not so sure they would be discouraged because people will find ways they get used to.

There could be the possibility that things will be cheaper because the UK won't be charging the VAT, if they stick to the same mindset when it comes to the VAT regime.

From a local populace 'demand perspective', the strong ties of where you do business with will overcome any difficulties at the end of the day. 

There might be a drift towards other EU countries so, maybe, online shoppers will start exploring German suppliers if it is smoother and easier.

But, people who have trade links with the UK will probably find ways and means, and maybe even get used to that different regime as time goes by, and business will still continue as strong as it always was.

When it comes to the customs department, I am led to believe that customs is also quite well prepared. Their developments are ongoing with their IT, and they're increasing their workforce.

At the same time they're smoothing the operational process even by creating an online payment possibility which should be started by the 1st of April., which is something we've been waiting for.

I think that it is something we'll weather, a storm that will pass.

 

Would you describe it as a short-term sacrifice for long-term gain?

I think so.

The markets have their cycles of every economy and economic activity and I think there might be something initially because people don't like change.

The UK is a strong country anyway. Their economy is made up of their people, and I'm pretty sure they won't set into an 'islanders' mentality.

I mean, when it comes to e-commerce, they are pretty developed. Many suppliers and retailers had been online from way before we had started going online, and we're islanders just as they are.

 

Take me through the process from an operational point of view.

The borderless mindset will now work with a border, for example, when we handle cargo that is going to a non-EU country.

There will have to be customs involved, the right documentation in place, and an element of bureaucracy will definitely slow down the process.

Although, as I said, it is not something that is a dampener to movement of cargo and international trade. We are used to this from how we worked before.

The problem is that over time people would have lost the skill and the right dosage of skilled people in customs; in customs documentation - because we didn't need them anymore. So that competence was lost.

To rebuild that capacity will take time, but thankfully in Malta we are a very small country.

Our groupage is 25 trailers per week in the UK business, which is nothing compared to 10,000 trailers a day crossing from Calais to Dover.

What the French have said they are doing in reaction to this is that before arriving to destination to Calais, so before crossing, they have different customs areas that will be handling this traffic - doing the checks, and whatever needs to be done as used to happen before.

That is the question - how do you handle 10,000 trailers a day with all those hundreds of thousands of pieces of cargo that they have, when you've been used to having a borderless crossing all these decades?

 

Governments in Europe have taken steps ease the transition. What do you think should be done locally?

What's being done in Malta, as has probably happened in the other countries, is based on what is public knowledge so far. It is very hard to have a one-size-fits-all solution in place.
What the government has done so far is what a reasonable person would do in the circumstances.

 

Do you see this possibly opening new opportunities in terms of business?

It will be an inflation on the local businessmen, because there are additional charges for the additional work that is required.

When you say business opportunities, for us, I wouldn't bank any growth prospects on the revenue lines of the company on this because this is like a "forced service".

This is not on our agenda, it is collateral.

We've got many creative business people - we adapt, and we are survivors. We find ways and means, and maybe people are already seeing opportunities for different types of trade.

As I said, maybe the VAT removal gets you a 22% cheaper purchase price, but what is the impact of items being subject to duty and tax?

An EU directive regarding e-commerce was concluded recently after many years, which put European retailers at a disadvantage, because when a European retailer is selling to his consumer in Europe he is charging VAT.

Whereas when you buy from non-EU e-commerce sites, only items that are in excess of €22 in value used to be subjected to duty and VAT. Therefore, most of the goods from customs that were declared to be below a certain price were advantageous for the consumer because the product is that much cheaper.

That has been abolished, and now everything is subject to customs inspection.

Whether that will happen in this scenario with the UK - it will probably be the same, so a UK retailer selling online to a Maltese consumer will be the same as a Maltese consumer buying from a Chinese retailer.

Problems find their own solutions  - that's the history of the world. You might not like it, you might fight it, but at the end of the day you have to adapt.

Just like we had a storm last week, you pick up the pieces and continue with your life.

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