Brexit will inevitably increase the cost of exporting Italian shoes to the U.K., explains Siro Badon, chairman of the Italian footwear association Assocalzaturifici, in an interview with Shoe Intelligence. But, fortunately, the U.K.’s departure of the customs union and single market has not significantly affected the supply chain of Italian footwear manufacturers.

How important is the U.K. for Italian footwear exports?

The U.K. has always been one of the main foreign markets for Italian footwear. In fact, in 2019 it ranked fifth for exports, both in quantity (12.8 million pairs, of which about half with leather uppers) and in value (€672 million), representing 6.5 percent of the sector’s foreign sales. The trend in previous years had been of a substantial stability in volumes, along with a non-negligible increase in value (up 20 percent between 2015 and 2019) due to an increase in the average unit price, reflecting a growing preference on the part of British consumers for high-end and medium-end Made in Italy products. Unfortunately, the trend in 2020 was decidedly negative – in line with that seen in other markets – strongly conditioned by the healthcare emergency, which slowed down international trade: in the first nine months of the year, 7.2 million pairs of shoes were exported to the U.K. (almost 3 million less than the same period in 2019, equal to a 29.1 percent decrease), with a fall close to 23 percent in value that nonetheless allowed it to retain fifth position in Italian export rankings.

Generally speaking, how important is Brexit for the Italian footwear sector?

Brexit inevitably will also have an impact on trade relations in the footwear sector. It’s an issue of moving essentially from a national supply, because this is what it is when you sell to a customer located in the EU, to one that is potentially subject to various tariff and non-tariff conditions: regulatory compliance standards, customer import licenses for example.

What impact have you seen on exports of Italian shoes in the U.K.? 

The country’s exit from the EU will inevitably lead to an increase in the costs for import procedures of Made in Italy shoes for the U.K. I’m not talking about customs tariffs, because the agreement reached between the two economies doesn’t foresee ad valorem customs on footwear that is made in the EU. However, export registration processes, certification of origin formalities, although not unsurmountable thanks to the REX (Registered Exporter) systems already put in place for other free trade agreements, will have an effect on corporate costs. Not to mention the burden of proof in the event of the verification of the origin of products. They are all disruptive elements that don’t exist in a trade relationship with an EU customer.

Do customs tariffs represent a problem for the sector, for example, due to the presence of non-EU components?

This depends on how certain aspects tied to rules of origin will be further negotiated in the framework of the free trade agreement between the EU and U.K. Obviously, it’s in the interest of our industry and the EU market to prevent Chinese production, or in general production from low-cost countries that are less inclined to respect labor and product standards, to be shipped to the European consumer through the U.K.

What will be the long-term impact of Brexit? What strategies have they put in place to better manage trade with the U.K.?

Ultimately, I believe that there will be an increase in costs related to customs formalities and document preparation processes for production that will be exported to the U.K. A lot will depend on the production chain of companies. A longer supply chain, which includes production sites and/or extra-EU supplies, could require controls and verifications to access the preferential duties reserved for products made in the EU. For production that is totally Italian, from the export side, except for the need to identify partners registered with the customs authorities as recognized importers, this should not be too complicated.

Obviously our association provides its members with all necessary expertise to face this change in prospects with targeted services on the reorganization and optimization of the supply chain and planning of customs operations.

In terms of strategy, have you already seen changes in the supply chain of Italian companies? 

So far there haven’t been any significant impacts.