Customs type E warehouse regime

Sector: FMCG – Major International Retailer of Consumer Electronics

Executive Summary

With the significant increase of directly imported product and a strategy to grow to 30%, from its current base of less that 10%, of all Vendor purchased stock, cash-flow, inventory costs & stock turns were a key issue for our client.

Trial products represented US$50m from a total spend of US$320m, in direct sourced product.

By implementing a Customs type E regimes would positively impact cash-flow & inventory costs, as well as allow resources to be redeployed in a more efficient manner, realising a cost upside in excessive of 1m GBP, in its first year.

Client Challenge

To replace Customs type C warehouse regime with type E. This change would allow not only the duty draw back for sales made to Customers travelling to non EU countries, through our client’s tax free stores, by operating the type C regime, but also introduce a further downstream duty & VAT tax point; moving from port of entry to warehouse despatch.

Implementing the type E regime relied upon Customs granting an approval license, based on daily electronic data transfer from our client’s systems to that of Customs; reporting receipts, despatches & adjustments on a daily basis, and a monthly reconciliation of all SKU’s (stock keeping units) held within the type E warehouse regime.

Approval could only be granted following strict auditing of our client’s systems, and a successful 1 month ‘live-pilot’ of the operation in action.

Our Solution

Working in conjunction with our client’s IT, warehouse and direct import departments, we prepare an outline document, together with a Standard Operating Procedure (SOP), detailing all aspects of the warehouse operation for standard operation compared to the proposed changes for operation under the type E regime, to present to Customs. This presentation formed part of our client’s formal application for approval.

To further endorse the contents of the document, warehouse site visits and IT systems demonstrations were also scheduled within the proposal.

We had also facilitated several meetings between our client and Customs, during the approval process, both pre & post pilot stage, before approval was finally granted.

Results & Benefits

• Duty & VAT payment point moved from port of entry to warehouse despatch – cash flow & cash capitol interest advantage, on average, 14 days on fast moving lines and 12 weeks on slower moving ones
• Release of ‘open to buy’ funds for other product purchases, improving availability or other capitol expenditure projects
• Redeployment of 2 full time equivalent personnel, involved in manually labour intensive duties, administering type C warehouse regime
• Operational platform laid to widen product ranges to be held in regime – leading to significantly further cash benefits and warehouse type stock holding locations

The delivery of this project was a major achievement, for us and our client, as very few Retailers operate and hold the approval for this type of Customs regime.