1 October 2020 - Croda International Plc (‘Croda’ or the ‘Group’), the speciality chemical company that creates high performance ingredients and technologies relied upon by industries and consumers globally, provides the following update to customers and partners on its Brexit preparations.
This update should be read in conjunction with our previous announcements in June 2018 and February 2019. As outlined therein, since the United Kingdom (UK) referendum result on membership of the European Union (EU) in June 2016, Croda has been working to assess and mitigate the likely impacts of ‘Brexit’ on its customers and suppliers under a variety of potential outcomes. Now that Brexit has taken place and we are in the “Transition Period” (until 31 December 2020), whilst a trading agreement is negotiated between the UK and EU, we have continued to prepare for the different potential outcomes for our business.
Our fundamental objective is to ensure that we offer continuity of service and supply to our customers, wherever they are, and this update is provided to reiterate to our customers and supply chain partners how we plan to achieve this objective.
We are a global business headquartered in the UK. Less than 5% of our sales are made to UK customers. We have 29 manufacturing sites, of which four are located in the UK, and over 4,500 employees, with 1,000 based in the UK. We have a small number of EU nationals working in the UK and vice versa.
As outlined in our previous statements, our initial risk assessment identified a number of key areas of focus for a potential Brexit impact. We continue to focus on those areas that could have the most direct impact on our ability to service customers, specifically:
- Having a Brexit-ready trading model
- Maintaining effective customer service and supply chain, in the main related to efficient movement of goods
- Ensuring compliance with Regulatory frameworks, most notably REACH.
Our established Brexit project group has fully assessed each area, likely impacts have been evaluated and we are now putting concrete mitigation plans in place. We continue to play an active role on the Brexit sub-committee of the UK Chemical Industries Association.
Uncertainty over the eventual Brexit impact has, unfortunately, not diminished. We have thus continued in full contingency planning mode with a view to ensuring business continuity under both an agreed customs relationship between the UK and EU or an exit without a trade deal. We continue to hope that a business-friendly deal can be reached but we remain of the belief that our ability to do business with customers and other partners will not be materially affected, even if there is no agreement on a trade deal.
We are continuing to refine our internal trading model within Europe to ensure that our ability to move UK manufactured product onto the continent and vice-versa is not at risk. In addition to the changes discussed in earlier updates, we have been working hard to ensure that we have a fully compliant model from VAT, duty and tariff perspectives. We continue to do everything we can to ensure that customers or suppliers will not be significantly affected by the changes.
Customer service and supply chain
We have been developing our contingency plan to ensure supply continuity in the event of any uncertainty and delay at borders. We have a comprehensive warehousing and stocking programme in place, both for finished goods and raw materials, and are continuing to work directly with customers and suppliers to address any specific concerns they may have.
We have completed the transfer of REACH registrations of overseas-manufactured product from our UK based Only Representative to an EU-recognised sister company and have started the transfer of registrations for UK-manufactured products (the process for UK-manufactured goods can only be finalised at the end of the Transition Period).
In line with the proposed UK REACH system, we intend to grandfather all of our previous registrations by 30th April 2021, and to notify all relevant substances by 27th October 2021 where we are currently either a UK Downstream user or where we ship our EU27 manufactured products to our UK customers. Registrations will be completed within 2, 4 or 6 years of 28 October 2021, depending on their Tonnage Band deadlines, as required under the new rules.
By building the right buffer stock in the EU and the UK, and having the right plans in place to quickly transfer registration of our products, we anticipate protecting customer service levels as we navigate through the first weeks and months after the Transition Period.
For further information, please talk to your regular Croda customer or supply chain contact.