News / Logistics players must accept the risks of indirect representation

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Logistics operators must take the risks associated with indirect representation in the post-Brexit environment.

Speaking to The Loadstar on the back of Dachser launching its new smart border connect suite of products, the company’s UK and Ireland commercial manager, Mark Cosgrove, did not deny the risks of indirect representation.

“But it is important to realise that, by not accepting indirect representation risks, you are consciously opting out of a growing segment of the market,” he said.

“Fundamentally, you are telling very experienced UK exporters that they do not know what they’re doing. Remember, it is only if the exporter provides you with incorrect data, especially the wrong commodity codes, that you are at any risk of penalties.”

Indirect representation relates to exporters selling goods on DDP incoterms into markets in which they do not have their own legally registered entity. Under the DDP, or delivery duty paid terms, the exporter/seller is responsible for all customs clearance, VAT and duty charges, and the costs of shipping the goods.

Under indirect representation, the overseas customs declarant becomes jointly liable for any liabilities that may arise as a result of an incorrect import customs entry.

Putting faith in their customers has proved difficult for some of the larger operators which have been hesitant about acting as an indirect representative on DDP shipments, especially SMEs.

Mr Cosgrove said that while the financial cost of any incorrectly declared shipments could be high, the “reputational risk” that could come from incorrectly declared customs entries had also been a key factor in this market behaviour.

“Clearly, companies can make honest mistakes, errors can happen, but most of our target shippers have been exporting for many, many years in both the pre- and post-Brexit environment,” he continued.

“The question you need to be asking is ‘how likely, or why, would they suddenly start becoming non-compliant?’

“Again, there are some commodities that are more challenging than others, but what this means is that logistics operators need to be selective when choosing suitable clients.”

Citing Dachser’s “robust” onboarding process for new clients, Mr Cosgrove said it was pivotal that logistics companies ensured they knew their shippers understood what was needed. This, he said, would avoid the other potential reputational risk that operators faced when operating as an indirect representative, “mainly, that customs authorities, on either side of the Channel, start to associate your company with regular incorrect declarations”.

He added: “A consistently poor reputation with overseas customs authorities could lead to challenges regarding important authorisations, like renewing AEO status.”

Dachser’s new smart border service, which ships on DDP incoterms, provides compliant UK exporters with ‘frictionless access’ to the company’s European groupage network, its launch following what Mr Cosgrove described as a successful pilot phase in February and March.