The next days will be decisive for the future relations between the U.K. and the European Union. The picture is changing every day. Meanwhile, many foreign companies in the sporting goods sector and others have been gearing themselves up for the worst scenario of a possible exit of the U.K. in case of a “no deal' with the EU.
In particular, they have been building up warehousing capacities for their products in the U.K. Adidas says it has set up a new warehouse there, which it will keep to better service the market in any case. Skechers, Timberland and other companies are said to have signed agreements in principle to use a bonded warehouse near Luton airport for goods imported into the country via UPS, which would be taking care of customs clearance and other related paperwork.
Anyhow, logistical delays and higher customs-related costs would be inevitable in case of a break-up with the EU, in addition to the departure of many foreign people employed in design, logistics and the retail sector.
More importantly, the British and European economies will suffer in case of a “hard Brexit” without an agreement. According to Bertelsmann, the annual loss could amount to €57.3 billion for the U.K. and €40 billion for the rest of Europe.
Meanwhile, as discussed the World Sports Forum organized on the eve of the recent Ispo Munich show by the World Federation of the Sporting Goods Industry, sports companies have other things to worry about in other parts of the world, including Turkey, which is apparently not respecting its customs union with the EU, and Russia.
For instance, they will have to cope with new and complex labelling regulations imposed by the Russian government on imported footwear. For a set fee, each SKU will have to carry a QR code to identify its origin when they enter the country, starting on July 1.
Russian analysts expect price hikes of 50 to 100 percent at the retail level because the entire customs clearance procedure is going to become more expensive. Prices of fur coats went up by nearly 50 percent after their compulsory tagging was implemented in 2016.
An effort to stimulate domestic production is one of the aims behind the new Russian regulations. On the other hand, the new requirements are expected to wipe out all counterfeit production from the Russian shoe market, benefitting branded imported products. This has already been seen with fur coats, where the turnover for authentic coats jumped by a factor of 13.
The issue of intellectual property protection is also on the table of the heated discussions being conducted between the U.S. and China, the world's largest shoe manufacturer. U.S. importers have been showing growing interest in other sources of production in Asia and elsewhere, including Brazil and Western Europe, following the imposition of new import duties on Chinese products by the administration of President Donald Trump. The issue is still stalled for the moment.
In the meantime, some U.S. companies are considering building up their own manufacturing capacities in China, or forming joint ventures with local producers, in order to better service the potentially huge local market.
There is also some lingering trade turbulence in Latin America, where a possible trade agreement between the EU and Mercosur may be jeopardized if the present liberal government in Argentina is not re-elected in September. The new, pro-business Brazilian government seems to be open for such a deal – under certain conditions – and for a decrease in import duties and taxes. On the other hand, Brazil's anti-dumping duties on Chinese footwear are supposed to remain in place until at least until March 2021.