The current maelstrom of politics, constitutional and legal uncertainty makes it almost impossible for businesses to keep up with what they need to be doing to continue trading in the short and medium term. At the time of writing, arguments about borders and tariff restrictions remain a concern; will we leave the EU with an agreement that allows continued unrestricted trade, or will UK traders and consumers be subject to import/export barriers that limit choice and/or increase costs and prices?
Reviewing arrangements with both customers and supply chains helps identify opportunities or threats to those arrangements. You may need to agree adjustments to tariffs or pricing structures, or responsibilities for import or export, or seek alternatives if you can no longer obtain or afford certain raw materials, products or manufacturing assistance in the same way.
Keeping trade wheels turning
If you trade internationally, you may already take advantage of the international trade terms called ‘Incoterms’ (introduced by the International Chamber of Commerce in 1936). They assist businesses by providing a standard approach to how delivery, risk, insurance, responsibility for transportation, costs of carriage and import/export arrangements work. The terms allow parties to agree other specifics such as transfer of title, price, payment and liability. Jurisdictionally neutral, they are internationally recognised as a commercial standard to assist trade.
The latest set of Incoterms will be updated from January 1st 2020 (replacing the 2010 version). The updates introduce mechanisms to align insurance coverage, update for use of electronic documents, allow more flexible ways for parties to agree transportation means and allows for security-related requirements within the carriage obligations and costs.
So if you already use Incoterms, you should check whether your terms have been updated and whether the terms used reflect the risk appetite for the business and your insurance. This may affect your existing contracts, but if you don’t use them, then they may help to provide a standardised approach when discussing trade arrangements with suppliers, distributors and customers.
Those sectors most likely affected by uncertainty are manufacturers and those buying and selling goods and raw materials abroad. Supply chain contracts need to allow enough lead-in for goods or materials to be delivered to meet deadlines; consider early ordering strategies to allow for potential delays at imposed borders, and negotiating longer delivery times with customers to ensure agreed service levels are achieved.
The new trading landscape will hopefully become clear within weeks, but preparation is the key to minimising the impact on your business; the chances are that you will need to review and restructure trading arrangements, and there’s no reason to wait.