As the Brexit slowly approaches, Otentic Customs, a founding member of New Silk Road Network, is gearing up for some major changes. In a conversation with Bas Verschuren, the general manager Customs, we learnt about the effects of this geopolitical decision that will change the lives of many, especially those in logistics doing business with the United Kingdom.
Apart from changes that await, Mr. Verschuren also elaborated on the role of customs agencies in a logistical supply chain, and the importance of conducting business with AEO certified units. On an upbeat note, when asked in the end what is the highlight of their company, Mr Verschuren enthusiastically adds, ‘we are really nice people’! A quality that is usually underplayed in the cut-throat world of business, Otentic Customs is truly set apart from others due to their empathetic ability to understand the needs of their customers.
In conversation with Bas Verschuren…
NSRN: Otentic Customs began its operations in 2009, and since then has seen significant growth as a customs agency in the Netherlands. How would you describe the journey? And what were the key moments for the company?
Bas: To be honest, the company is much older as we were a part of a larger group of companies called the Peterson Group. They are pretty big in offshore, inspection and control of bulk materials. We were a strange company for them since what we basically did when we started was just unloading containers, something like stevedoring. We unloaded the containers with 4 persons, which took us a couple of hours. In contrast, they did inspections of a vessel with 20,000 tons with one person. So, Peterson never really understood what we did.
One of the managers of our firm then looked for a partner to take over the company, and together they bought the company in 2009, in the middle of the economic crisis. When they bought the company, the first thing they ensured was to keep all the staff on board, helping the company to retain all the knowledge. None of the customers left, so our business was viable. As we started, we were called Otentic Logistics and besides providing third party logistics services we also offered custom services. Then we saw that there were some risks associated with customs clearance, as we declared on behalf of the customer, making us a part of the transaction as well. Due to this, the managing directors decided that they needed separate companies and that was when Otentic Customs was founded, with just two people.
The first thing we needed was the Authorized Economic Operator (AEO) certification. After we received that we started to acquire customers. New customers led to new staff, which gave us the possibility to look for more new customers, and the cycle continued. We do not want the workload to get so high that there is an impact on quality. We have various types of customers, for example, we have logistics providers that need customs brokers. We also have companies that produce their own products. We clear all kinds of materials from shoes to bicycle tires etc.
In 2015, we started focusing on the commercial side of the business. It required us to change the way we worked; we became more active in acquiring new customers. Our most significant base is the German market, approximating to 60%. In 2019, we had our 10-year celebration with a big bash (laughs). This year we were audited again by the Dutch customs for all our Dutch permits. It was quite an exciting time because the licenses are the basis for our entire business. We underwent a 5 month long but smooth process with the Dutch customs with hardly any hiccups. Afterwards, they renewed all permits, and we gained a new AEO permit. The best part was that we received compliments on our staff and procedures, which is so essential for us.
NSRN: Customs agents are usually required to know vast amounts of information when it comes to importing and exporting goods. What are the duties and responsibilities of a customs agent in a logistical process? What are your main responsibilities at Otentic Customs?
Bas: I am the Manager of Otentic Customs; basically, my job is to make sure that my six customs brokers can easily do their jobs. They do not have to worry about anything, they just must make the customs declaration, that is what they are good at. I manage the departments, and I am also responsible for the commercial side as well. I represent our department in the management team. Moreover, I am responsible for the quality and environment of the company.
The primary job of a customs broker, of course, is to issue customs declarations. Moreover, our customs brokers are thorough with their foundational information, which helps them to acquire new data easily. They know the customs codes for many countries or where to find information in the regulations. Apart from just entering data into the system, what they need to do is check any corresponding information in the forms, such as if the HS code is applicable or not. What is important is that a customs broker must never be in the way of a logistical process but must also comply to legislation. We are in the flow yet remain as unnoticed as possible. If our customers know that we are there, it probably means that there is a hiccup or delay, which is not what we want. If there is a hiccup, we get in touch with Dutch customs, because they are responsible for customs checks, document checks etc. most situations are created there. Since we have been in the business for a long time, we have several contacts there who can help us out.
NSRN: There usually tends to be some amount of geopolitical influence on the functioning of customs between borders. For example, from January 2021, the transition period for Brexit will end, and business will have to adapt accordingly. What are you doing to prepare for this situation?
Bas: Well, where do I start… We started our preparations for Brexit in 2019 already. We know that this is a unique situation, one that we have never seen in the EU. We began collecting information from the Dutch government and our branch association. However, at that point, there were too many things unclear. We started getting more information during the end of 2019, entering 2020, yet still there are many uncertainties. This is because the government agencies are themselves not sure what is going to happen now. What we can be sure of is that a customs declaration will be required for import and export.
Since between the EU countries there were never any customs checks, we can expect some new regimes. EU countries might mirror third country checks without any trade agreements. This means that the assessments administered for any other country, like China, Paraguay etc. will be applicable for the UK. The first three months are going to get messy. The companies that only have been sending products to the UK are utterly unfamiliar with customs procedures. They are asking us questions like what HS codes or Incoterms are, so these companies are relatively unaware of these aspects. This would result in the slowing of the logistics flow, because if the customs declarations are not in place, then the material cannot be shipped to and from UK, resulting in truckers just standing there without any cargo to move.
I think it will be very challenging, at least for the first three months. I am not sure if people or businesses would have known the consequences, they would have voted to leave. The UK is not self-supporting, even in terms of food production. At the same time, it is more business for us, but it will not be smooth, at least initially. These are the kind of hurdles that we generally tend to avoid because for us making the declaration quickly is the goal. But without any proper guidelines in place, it would affect the business. Since we are responsible for the information in the customs declaration, you need to have the knowledge to make the documents correctly.
We got in touch with our customers at the beginning of 2019 and asked them if they had traffic with the UK. At the time we hardly got any response, until September 2020. That is when people started realizing that this is happening, and we need a solution. It is hard, especially since we have been working on a solution for more than a year, yet some customers only realizes now the need to adjust. So sometimes, we must be straight and inform them that a quick fix at this point will not be possible anymore. Brexit is causing us to have many hard conversations.
NSRN: Another very curious aspect of customs agency is the maintenance and acquisition of different certifications. What measures must a company like Otentic take to maintain high standards?
Bas: The most essential part is the AEO Certification, if you do not have that, then you are not a reliable partner to Dutch Customs. Once the customs departments see our AEO certification, they understand that we are reliable, and that gives us some perks. They also allow you to be a part of the customs check chain, making it much easier for the customers.
This gives us opportunities, but at the same time, a lot of responsibility. You need qualified staff with proper training. You need processes and procedures that are foolproof. For these, you need robust IT systems since 90% of the communication with customs is digital. These are monitored through internal controls, like KPI’s, we have approximately 20 internal controls which are administered on a monthly or weekly basis. Through the outcome, we see if the process is working in accordance with the protocols set by the Dutch customs.
Moreover, you need strong connections with Dutch Customs, if there is any trouble, you should be able to contact the right person in the department to help you sort the matter. Otherwise, they can be very cut and dry. Knowledge in our business is everything.
NSRN: Otentic, apart from customs, also conducts warehousing for their customers. What are the different services that your company offers, that help you carve a niche for yourself in this highly competitive industry?
Bas: There are lots of logistics companies that provide warehousing. But, from the beginning, our warehouse only targets a niche market. We built a new warehouse in 2016, we had 10,000 sqm before then which we doubled in 2016—our warehouse stores raw materials for food, feed, and chemicals. We also have certification to store these specific types of cargo. I understand it looks like a strange combination (laughs).
But you see a lot of traders that transport raw materials for food products, also have dangerous materials in their portfolios. For example, citric acid used in soft drinks is also a hazardous substance. 90% of their business is food and feed, but 10% is usually chemicals. There is a lot of overlap infrastructurally to handle these materials, but you will never see these materials stored in the same place. All are stored in different compartments of the warehouse.
We want to stay in this niche because people will always need food, so there will always be a food industry that will require raw material. The recipients for the goods we store are companies who produce foodstuff, but also animal food companies. These companies are mostly situated in Germany, France or the Netherlands. Germany is a big market for us, for sure. In terms of the New Silk Road, we are basically looking for a Chinese partner that is doing import to Europe, so we want to be able to do customsdeclarations for their customers.
Finally, what separates us from other companies is our size and culture. We are small, with just about 40 employees, which makes us flexible. We are structurally flat, and that gives us the ability to act swiftly and make the necessary decisions without the bureaucratic procedures which slows down processes. This is essential in today’s fast-moving world of logistics.