This is an interview with Martin Dubbey, Managing Director at Harod Associates. Martin will be speaking at the World Trade Summit in London on November 1st. You can sign up to it here.
Harod Associates help companies manage risk when selling overseas, including the threat of fraud and crime. What are the main things that exporters need to know about when it comes to risk and international trade?
We’re a company of former customs officers and investigators. We look at crime and trade risk issues in terms of threats to the supply chain. We also look at border and customs procedure changes that may come about because of Brexit and the encouragement to do more trade with the rest of the world.
From my perspective, an important way to deal with supply chain risk is to ensure you know who you’re dealing with overseas, the classic of know your customer and know your supplier. Are they credible or are you being drawn into a fraud or scam. Are they who they say they are?
Our role is to protect our customers from supply chain risk, to protect them from regulatory concerns such as sanctions and breaches in customs procedures, whilst at the same time making sure that they are dealing with suppliers and customers who are who they say they are.
Would you say that the biggest aspect of managing risk is doing your proper due diligence?
It is absolutely vital to know who you are dealing with as you move into new markets. There’s plenty of due diligence involved in what we do for sure. There are plenty of fraudsters out there, so doing due diligence becomes absolutely vital both from the perspective of making sure you know who you’re dealing with and making sure you don’t get ensnared in any regulatory or crime issues
With Brexit on the way and lots of companies being told to spread beyond the EU, have you seen an uptake in interest?
From my experience so far, it’s a bit early for companies to think about new markets. People are still waiting to see what’s going to happen. Despite the encouragement, it’s hard to see a move or a trend in companies looking far beyond the EU. My main concern is that there are between 80,000 to 150,000 companies who only trade with the EU and who have only experienced free trade routes into export before. If new regulations come in, which is likely, how will that affect them? That’s where we will come in to help and advise on the new procedures.
In terms of the changing of tariffs through things like trade wars as well, do you help companies already in that respect?
This is a concern of ours, but our role is more down to earth, helping companies with customs processes and procedures. We help companies who have not experienced the full extent of customs procedures before, whether under WTO rules or another arrangement.
Companies who have already been dealing with WTO rules won’t have too much of a problem extending that to their European market, but we just don’t know how bureaucratic it might get. If it becomes a log jam it will affect everyone no matter how well versed you are in the procedures. As former customs officers we help and advise people on the best way to prepare for Brexit in terms of both their own customs procedures and managing risk throughout the supply chain.
Do you think businesses in general are well enough prepared?
It will be a real jolt for those companies who’ve only traded with the EU before – particularly those who have traded over just the last 10 to 15 years. One of our former customs officers worked in customs control before our entry into the single market in the 70s so we’ve got a depth of experience about what trade might look like after Brexit. Overall companies have to do much more to prepare. This is absolutely business critical now. I would advise that within companies a point of contact for customs trade procedures is set-up.
The primary concern will be those companies who’ve only previously dealt with Europe; secondary will be those looking for new markets and how they will deal with WTO rules coming in.
AEO has been talked about as a solution. Should companies be looking at AEO as a way of mitigating risk?
The system of AEO has been heavily pushed in the government’s white paper as part of its proposals to the EU. I don’t think it’s a complete solution, but it will definitely be a partial one if the EU agrees.
AEO is built on WTO guidelines and adapted around the world. There will therefore be a benefit to exporters, who are looking to trade further than they have done before, to get AEO. Because we know that other countries are coming on board with this system – such as Japan and India – it’s going to be mutually beneficial for companies in these adopting countries.
We say it’s helpful because it involves a review of your physical security and it involves a review of your compliance to ensure you are up-to-date with customs procedures – both are things we recommend all companies to do.
We’ve developed a gap analysis software that helps companies through the AEO process. You’ll be able to assess where you stand in relation to AEO requirements and where you need to improve. Once you’ve decided you’ve got everything you need using the software, you’ll be able to press a button to print off your AEO application.
The software will be useful for companies, particularly as there’s been an increase in applications made to HMRC. Our understanding is that HMRC are looking to recruit 5,000 new customs officers to police the borders; of those 5,000, 1500 will be allocated to policing AEO. It’s clearly on the government agenda.
What we don’t know is what the EU’s response will be, so we don’t know what benefits there will be to a German company working with a UK company that has AEO. We don’t know yet if it will contribute yet towards frictionless trade, but it appears high on the government agenda to do so.
How can industry and government work closer together to get more companies thinking about AEO?
Clearly there’s been a lot of take up, but the government needs to do more to increase the carrot to companies to make applying more attractive. There hasn’t been this carrot till now. If this is a solution for the problems of trading with the EU, there could be a stampede of companies looking to go through this process.
It’s worth considering in terms of benefits. The government hopes it will facilitate trade and it may be fast-tracked, with benefits like duty deferments included. They’ll probably need to incorporate AEO with other business requirements like VAT to make it truly attractive.
Government is thinking seriously about this process, but if there’s an agreement with the EU that AEO is part of the answer to frictionless trade, there will be a lot of encouragement for traders to go ahead and get authorised.
At the summit you will be on a panel discussing a ‘Roadmap to Export Success’. What other factors should be considered by UK exporters when planning their routes ahead?
I’m concerned about the security of supply chains and knowing who you’re dealing with and whether they’re going to pay, as well as whether you’re going to be able to fund the process of export.
On the panel I’ll address how these threats can be addressed by proper due diligence, proper management, and how we can help you understand who you’re dealing with.
One of the key things is not to waste time dealing with fraudsters who aren’t who they say they are.
In terms of anti-bribery laws, can companies be too risk-averse because of them or do you think companies need to take them even more seriously?
It’s hard to answer in generalisations but anti-bribery laws are good because everyone knows where they stand. If you’re dealing with someone who doesn’t know where they stand, I would be suspicious of be dealing with them anyway.
My view is that anti-bribery laws are a good thing in this sense because they give companies a line in the sand where they don’t have to tolerate certain behaviours.
Of course you can’t avoid risk at all costs in businesses – there are always risks involved when moving into new markets. But you shouldn’t lose your guard on anti-bribery. You want to be dealing with genuine businessmen, who genuinely want to do trade. We see on a daily basis fake companies, fake people, fake shipments, and even fake banks. Companies need to be aware of the risks out there and how they can mitigate against them.
Why are events like the World Trade Summit so important for UK exporters?
People need to be informed and understand what’s going on in the world of trade. We can all learn from each other how to mitigate against the various risks out there, so I’m looking forward to exploring that element of it with the panel and the audience.
It’s really business-critical that we don’t know what we’re going into yet with Brexit. We really need to help each other to prepare for how we can take this forward.
