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The Grapevine

The WSTA's views, distilled.

David joined the WSTA in March 2014, after 16 years prosecuting Customs and Excise offences and working in other regulatory areas.  He supports the Production Working Group and Logistics Group, particularly on issues such as  the Spirit Drinks Regulation, ingredient and nutrition labelling, working with HMRC and DEFRA.  He is also continuing to develop the WSTA’s work on responding to fraud, participating in the Joint Alcohol Anti-Fraud Task Force.

David Richardson to talk about regulations on shipping in bulk at the International Bulk Wine and Spirits Show

I’m delighted to have been asked to present a session at the International Bulk Wine & Spirits (IBWS) Show, taking place in London on January 24-25, 2018

International Bulk Wine and Spirits Show is presented by Beverage Trade Network, the leading online platform dedicated to connecting the global beverage industry. Beverage Trade Network (BTN) successfully connects wineries, breweries, distilleries and brand owners with international importers, distributors, brokers and beverage industry professionals on a daily basis. Strong partnerships with international and US organizations have helped BTN establish IBWSS as a premiere sales and marketing event committed to connecting the private label and bulk beverage industry.

I’ll be talking about “Regulatory issues specific to bulk products compared to cased goods”

The principal reason for shipping in bulk is the ability to save on transport costs and thereby maintain or increase price competitiveness.  The transport method needs to ensure that the integrity of the product is maintained during the transport process.

As well as ensuring accuracy (are you sure that’s chardonnay in that 22,000 litre tank?) bottlers also need to pay attention to rules on blending and other operations, such as rendering a product sparkling.

The use of a bottling facility may also lead to different decisions in complying with excise duty requirements. 

The rules on geographic protection (PDO and PGI for wines, GI for spirits) may prevent or impose specific requirements on bottling. 

Whilst product labels for bulk and cased goods both need to comply with the destination market’s rules, there may be different challenges in designing and applying the labels, for example in ensuring conformance of batch and lot numbers to maintain an accurate audit trail.

The regulatory environment is also affected by the political context.  Brexit is a prime example of an event that will have a major impact on importers and exporters and where the WSTA is well placed to interpret and influence.

 

Full details of the show can be found at http://ibwsshowuk.com/ and I look forward to seeing you there.

#BulkWine #Spirits #IBWSS #London

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AWRS and due diligence

A number of questions have come in relating to how due diligence will work. It may be that you have already received a questionnaire from trading partners asking all sorts of details about your business.

If you haven’t received one there could be one winging its way to you, so I thought I might try to interpret what the requirements are. 

This is an area that is far from settled and will continue to develop and evolve for some time.

Don’t be alarmed if you receive a letter from a trading partner seeking information about your business. “Due Diligence” is increasingly becoming the new normal, The due diligence requirement already applies to traders in bond and will soon apply to duty paid wholesalers. 

At its heart, it requires businesses to know who they are trading with and then understand the risks of that relationship. The aim is to avoid traders introducing smuggled or counterfeit goods at any part of the supply chain.

It will be a matter for individual businesses to satisfy themselves that their trading partners are suitable.  Whilst trade buyers will eventually be able to see that their proposed trading partner has an AWRS registration and is a “fit and proper” person, that alone will not be enough to satisfy due diligence requirements.

There is some guidance from me on the front page of the WSTA website, which you can access through the members’ section and log-in:

 

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This considers the sort of questions that a business might wish to ask and, in turn, provide to its trading partners.  The list is neither exhaustive not prescriptive and not all questions will be necessary in every case.

I am aware that a number of businesses are not prepared to answer all of the questions that are being asked of them – directors’ passport and home address details are a particularly sore point. There is no obligation to supply all the information being requested.

Common sense will have to come into play here and the person asking the questions will need to consider whether they have enough information to go ahead with the trade.

 If some information is absent – this can increase commercial risk, or at least affect the terms on which parties are willing to trade. 

Put simply, the more information you have, the more comfortable you may be in offering better credit terms, increased volumes and having less frequent reviews of the relationship.

The most important point is that due diligence is not about having answers to a set list of questions. Think about the questions you need to ask and analyse  the effect of the answers you receive against your research and against your business’ risk appetite.  

I believe there is a learning curve for businesses and HMRC and that the official guidance will develop further once it is up and running in the real world.

 Competition laws may also preclude companies from seeking some information about, for example, the underlying reasons for a deal or its profitability.

There may be a role for third party due diligence consultants to hold information securely and report a clean bill of health (or otherwise) to an inquiring party without breaching confidentiality.

I am working on a model due diligence policy and we also hope to be able to offer the services of a selection of external due diligence consultants to members in the near future.

 

 

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WSTA's Logistics Group calls for vigilance against delivery hijacks and company identity fraud

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Alcohol companies have been asked to warn lorry drivers not to be duped by thieves posing as warehouse staff.

Following a spate of thefts logistics companies flagged up the risk of robberies at a recent meeting of WSTA Logistics Group.

As part of the Group’s work it considers fraud risks and contributes to discussions with HMRC through the Joint Alcohol Anti-Fraud Task Force.

Alcohol exports and imports have recently been targeted on their way to the warehouse.

The lorry drivers are stopped near the destination by someone with plausible paperwork, who appears to be expecting the load and claims to work at the warehouse.

The driver is told the warehouse is busy and that the goods should be dropped off round the corner.

It is, of course, stolen at that point.

There are also instances when drivers are alleged to have colluded in this type of theft.

To prevent being raided companies should give drivers clear instructions never to drop their load anywhere other than within the warehouse premises.

If they are approached drivers should call 999 immediately and ask for Police assistance.

In a second type of fraud, legitimate company details are being used to make corrupt purchase orders appear genuine.

The fraudsters use contact details such as telephone numbers and e-mail addresses which are subtly different from the real ones - for example .com instead of .co.uk.

The delivery address will take the goods straight to the thieves’ premises.

Or on some occasions the correct delivery address will be given but the consignment is then diverted while en route.

Sometimes these frauds appear crude; others appear very plausible and are often addressed to hundreds of potential suppliers, who may be lured in by the idea of a major UK customer.

These crimes can be difficult to prevent and detect.

Regular suppliers can be given clear advice about how orders will be made and processed, but prospective suppliers do not have that protection.

Companies can help by being willing to respond quickly to queries from potential suppliers who may be victims of this sort of scam.

 

To help stamp out this type of fraud, companies are asked to report incidences to ActionFraud – www.actionfraud.police.uk and to the WSTA as we can alert members of the Fraud Prevention Unit to the details being abused in each case.

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Positive news from HMRC

HMRC have indicated there is NO policy of automatically applying conditions to each excise trader authorisation that they issue.

They will only apply conditions where they identify a risk.

When HMRC receive an application to vary conditions, they will also consider if there is any need to have the conditions at all.

HMRC have made it clear they are open to hearing from businesses who would like to have their excise authorisations reviewed or varied.

I’ve now seen several examples of businesses applying to have warehousing conditions or WOWGR authorisations reviewed - resulting in all their conditions being assessed and removed.

This is an encouraging development and has given businesses more commercial flexibility.

 

I believe there is a good opportunity to rationalise conditions and I would encourage other members to make the most of the opening.

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WSTA’s independent streak

I was delighted to be invited to be a panellist at the Harper’s March for Independents event held yesterday.

It was fascinating to hear about the range of business models and different types of diversification, including food offerings, wine clubs, buying groups and on-line retailing.  I think fellow speaker Angela Mount (MW) summed it up when she said it wasn’t enough just to be passionate about wine.

Our panel was looking at new ways for independents to change their business and increase profit.  Hal Wilson (Cambridge Wine Merchants) looked in detail at some of the ways to use in-bond purchases, duty deferment accounts and guarantee exemption schemes to delay the time when excise duty has to be paid, aiding cash flow and profit margin.

I used the opportunity to remind the participants about the obligation of excise traders to be able to demonstrate “due diligence” to HMRC in their business dealings.  Even if a retailer mangers to escape the requirement to demonstrate due diligence themselves, they can expect their wholesalers and suppliers to be required to do so and to undertake regular checks to ensure that their business relationship is on a sound footing.  Moreover, it makes good commercial sense to have robust due diligence processes.

I also spoke about the proposed Alcohol Wholesaler Registration Scheme.  We are expecting this to be introduced in the Finance Bill.  Even retailers who only have small wholesale exposure (beyond the merely “incidental”) will have to register and, when purchasing from UK wholesalers, will have to make sure that their wholesaler is validly registered.  Retailers will need to have processes to check that their wholesaler’s registrations are valid on a regular basis and this links in with the sort of checks that would be expected as part of due diligence.

In some cases, if a trader fails their wholesaler application, their other excise registrations will be at risk, so their whole business is potentially at stake. Failure to comply with the scheme could lead to civil penalties or prosecution. 

The regulatory landscape is particularly active – traders of all kinds will need to remain alert to developments.  This is an area where the WSTA’s knowledge and access to government departments is particularly helpful to members.

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WSTA fighting fraud

WSTA fighting fraud

Alcohol fraud in the UK damages legitimate businesses, brand reputation and deprives the Treasury of duty income. Illicit products also adversely affect consumers and in some cases can cause significant harm. It is estimated that alcohol related fraud costs the Treasury £1.3bn in lost revenue a year. This happens through a range of methods including failure to pay duty, theft from retailers and wholesalers and illicit alcohol.

While the problem is significant, too often information about incidents of fraud, particularly at the retail level, is too fragmented. The WSTA takes this issue very seriously on behalf of our members and has therefore been working on a number of initiatives to support them to tackle this problem.

We are pleased therefore to announce that the WSTA has launched a new confidential fraud reporting tool at www.wstafraudreport.co.uk.  This allows anyone to report a suspected fraud on a simple form on a confidential basis and this will plot the incident on an online map with a link to the details that have been submitted. With the ability to identify hotspots and trends, we will be able to share anonymously this with law enforcement colleagues to help inform their response.

For this resource to be successful, we are urging members (particularly retail members and wholesalers) to identify concerns and actively report them, as well as actively support the initiative and publicise this site in their own businesses websites.

We have deliberately tried to keep the site simple and business-like, with only a small amount of information being sought and we will be refining this in the light of experience.

Once a report is submitted, it is invisible to the person submitting it for data protection reasons.  We will be notified when each report is made and assess it before it goes on the system or is shared with law enforcement.

I am confident this will be a welcome addition to the range of reporting mechanisms currently available and go a long way in our fight against alcohol related fraud.

For more information you can visit http://www.wsta.co.uk/what-we-do/policy/133-info/607-fraud-prevention-unit

 

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