The Republic of Belarus will suffer negative economic consequences arising from the political crisis. This will affect both the republic and most probably the freight market between the European Union and the Russian Federation. At least, we should expect redistribution of transit cargo flows if Minsk carries out its threats in response to the restrictions introduced by Poland and the Baltic states.

Aleksandr Lukashenko, the President of the Republic of Belarus, has made two statements – about the redistribution of Belarusian cargo traffic from Lithuanian ports to Russian ports and about closing borders with Poland (in Brest and Hrodna areas) thus shutting off cargo transit from Western Europe.

Andrey Abragimovich, Director of Transport Business at TELS Group of Companies, shares his ideas on the possible consequences and how they might affect the participants of the freight market if these plans are impended.

Andrey, what should carriers and cargo owners prepare for considering the recent statements made by the President of the Republic of Belarus?

The redistribution of Belarusian cargo transit from Lithuanian ports to Kaliningrad and St. Petersburg is very likely. At the same, the Baltic states may also shut off the cargo transit from Kaliningrad via their territories. In this case, we will have only St. Petersburg.

Even if such decisions are not economically advantageous for Belarus, the Belarusian leaders are being more and more motivated politically, which is, of course, beneficial for the Russian Federation.

Why is it advantageous for Russia?

The benefits are evident:

1. growth of cargo transshipment in Russian ports;
2. growth of transit capacity via the Russian territories (a great gift for the Leningrad and Pskov regions);
3. improved competitiveness of certain Russian goods due to increased costs of Belarusian exports (Uralkali will be most happy).

Belarusian leaders have been discussing the possible shift from the Baltic ports to Russia for a long time already, but words have not been brought to life, as it was not economically advantageous. Now that serious pre-conditions to move from words to action have been created, Russia will not miss the chance, the opportunity to influence Belarus in the current conditions.

It is not yet clear how this will affect private business - whether they will be restricted to use the EU ports or these restrictions will only apply to state-owned enterprises.

What about the closed borders with Poland? It seems like a very tough action creating problems for all market participants.

We hope that all the threats expressed by the Belarusian president will not be carried out as neither Belarus nor Russia will benefit much from the consequences. This will be very beneficial for Lithuania, Latvia and Ukraine as their transit capacity will increase. Belarus will lose transit profits, Russian and Belarusian carriers will face additional losses, while the imported goods, raw materials and spare parts will become more expensive.

But let's imagine the following situation when the border between Belarus and Poland is closed. How will this affect the participants of the logistics market?

The cargo will go via Ukraine and Lithuania bypassing Belarus. This will

• increase delivery time and costs as the routes will be longer;
• create shortage of transport resulting from the lack of Ukrainian and Lithuanian transit permits. And although Lithuanian and Ukrainian permits are not limited for Russian carriers, they might end quickly due to a sharp increase in cargo traffic.

In general, it means that the transit of European goods will not be shut off but the deliveries will be longer and more expensive. Who will suffer most? The Russians and Belarusians. That is why I think Russia will persuade the Belarusian leaders from taking such measures. However, it is very difficult to claim anything, as we may not understand the entire motivation of our political and economic leaders.

Besides all this, are there any other negative risks arising from the Belarusian political crisis?

Due to a sharp deterioration in interstate relations with the Republic of Belarus, the European countries (primarily Poland) may significantly reduce the permit quotas for international road transport for Belarusian carriers. They have been decreasing yearly with little chance to negotiate additional permits. Now the quotas may be reduced even more without the possibility to negotiate additional permits. This will greatly decrease the possibilities of Belarusian carriers in the transportation market to / from Europe. For cargo owners, this means an increase in logistics costs as the transportation capacity in the required destination will reduce.

Natalia Zuy, Head of the Legal Department, TELS Group

Due to the increase of criminal incidents in the cargo transportation market, the Legal Department of TELS Group reminds its employees and partners once again of the importance of the rules preventing cargo theft and the procedures allowing to admit contractors for transportation.

Fraudsters act skillfully and in a sophisticated manner as they have good knowledge of both cargo transportation and psychology. They easily gain managers’ confidence trying to dull their vigilance and impel to negligent actions aimed to bypass the admission instructions.

According to the number of the insured events declared by the TTClub at the end of 2019, the following cargo groups were stolen most often:

• 28 % of food and drinks
• 13 % of electronics
• 10 % of alcohol and tobacco products
• 7 % of products for the automotive industry
• 6 % of consumer goods
• 5 % of building materials
• 31 % of other products (metals, fuels, chemicals, etc.)

The analysis of the insured events allows to make a list of typical situations which may result in cargo theft.

Placing orders via the Internet

Fraudsters find cargo transportation offers online, get in touch with the managers and offer transportation services at attractive prices. It is advisable to exclude online offers and use the Internet only to find, check and outsource subcontractors for possible transportations.

Getting in touch with subcontractor only via the mobile phone or public services

Fraudsters are the first to get in touch with the managers. They offer free cars in different regions. They ask for orders insistently thereby fishing for information on the types of transported goods and the costs. Significantly, all the communication is carried out by the phone and / or e-mail and instant messengers from public domains like Gmail and Yandex.

It’s important to find out subcontractor’s landline number as well as their corporate website, e-mail address and the office address where the company is physically located.

No mentions or references on the Internet

Any reputable transport company will have credible references on the Internet. Besides reviewing company’s feedbacks online, it’s important to study their website.

Large fraudsters clone websites of real transport companies. The site may differ by only one letter, so you need to pay attention to this as well and compare the websites of potential contractors in various sources on the Internet.

Suspicious registration documents

Don’t hesitate to raise a red flag if the identity of the provided documents is under question, if the business is registered or re-registered in the current year, if the owner of the company has changed or the company owns only one car.

Fraudsters often use the documents and data of the existing companies which have been previously received by fax or downloaded from the public websites. Naturally, the real company will deny their involvement in any transportation after the theft.

That’s why it is important to check the authenticity of the registration documents with the information available on the official websites responsible for business registration. It’s also advisable to get in touch with company’s managers independently.

“Friday syndrome”

Most cases of cargo theft fall for Fridays involving deliveries to remote destinations after the weekends or holidays. Fraudsters disappear with the cargo and sell it conveniently within the agreed timeframe. It is best to refuse employing unverified subcontractors for transportations during such periods even if this will result in a penalty for the late placement of a vehicle.

Subcontracting orders

Even the most thorough verification of a subcontractor to be involved loses any meaning if the latter is subcontracting the order to someone without verification. Don’t be deceived by the hope that such a negligent subcontractor will compensate for the losses. In real practice, they will either go bankrupt or will use any chance to avoid large financial liability. It is advisable to either prohibit further subcontracting of certain orders or agree on the contract conditions limiting uncontrollable involvement of third-party companies.

Involving reputable carriers and drivers into fraudulent schemes

One of the traditional fraud schemes implies the attraction of reputable carriers having all the required registration documents including the valid insurance policy. During transportation the carrier or their driver receives an instruction (sometimes by the phone!) from a fraudster’s subcarrier referring to the cargo owner and asking to deliver the cargo to a different address. Thus, the cargo easily gets into fraudster’s hands and the carrier who has fulfilled the order refers to the instructions given to them directly from the customer.

If you are forwarding expensive marketable goods with a new dealer, make sure that the carrier and the driver will not re-address the cargo without a direct confirmation from the shipper.

Replacing the vehicle

Fraudsters send information about the replacement of the vehicle just before the loading day. The forwarder simply has no time to check the new car or pays little attention to the replacement by simply changing the car number in the transportation documents.

It’s important to be careful with the replacements of a vehicle by clarifying the reasons for the replacement, checking the new vehicle and the driver, warning the shipper about the Impossibility of loading to an unverified vehicle.

Invalid insurance policy

Cases when companies with a valid insurance policy commit frauds are very few. Generally, fraudsters provide a fake, third-party, unpaid insurance contracts or contracts for a short period, usually for the period of the expected loading.

To verify the validity of the policy, send a written request to the insurance company that issued the policy or call them to learn more information on the policy. Don’t forget to record the name of the insurance agent who provided you the requested information.

How does TELS verify its contractors?

TELS updates the instruction allowing to admit contractors for the transportation of goods on a regular basis according to the new types of fraudulent schemes. The execution of the instruction goes along with program and organizational control systems. We verify the supplier by the history of the creation of the transport company, changes in founder members, compliance of the documents with the samples approved by competent authorities in the country of registration as well as check company’s background. According to the Instruction, the following characteristics may witness of an unfair business:

• the information in the provided documents is different from the information obtained from our information sources;
• lack of any supplier’s activity;
• change in ownership and type of activity in the past 1.5 years;
• company’s legal address coincides with the mass registration address;
• no website at all or a doubtful website (created recently, filled poorly, no information on the developer, etc.);
• no landline number or the landline number specified in the documents belongs to a mediator (dispatcher) or does not exist at all;
• no information on mandatory financial statements.

There are over 20 points helping our employees define unfair businesses, but we would prefer not to disclose them all as not to reduce the controlling effect.

Dear colleagues and partners,

TELS Marketing Department has reviewed its work with the customers during the first six months of 2020 and provided the details to company’s management. The overall results are as follows – the increase of freight orders by 5 % and the actual profit by 6 % against the same period in the previous year.

This trend is rather low as compared to the average annual indicators in the previous several years. At the same time, we have shown immunity to downturns over the unprecedented double crisis (general global financial crisis exacerbated by the pandemic).

No doubt, COVID-19 has affected cargo portfolio greatly as some product groups decreased, while others increased. “A significant decrease in transportation volumes took place in metalworking, woodworking, car manufacturing, construction and HoReCa industries. Yet the negative trend was offset by the increase of freight transportations in the industries producing and selling food and hygiene products,” commented Ivan Samusev, the Commercial Director of TELS Group.

Despite the mass layoffs and closure of manufacturing plants in certain industries around the world, we faced a slight reduction of transportations in these segments against the level of the market decline. For example, this happened to the products in the automotive field.

Just to remind, according to the forecasts made by the Jefferies and Transport Intelligence, “a European road freight market 4.8% smaller in 2020” is the best Europe’s road freight providers can hope for (17% in the worst-case scenario). TELS has managed to maintain the positive trend during the negative period of market stress. This once again proves that we are capable of providing reliable long-term partnerships.

Registration of goods labelled with Data Matrix codes in the Chestny Znak (Honest Mark) system is being tested in Russia. Labelling of all pharmaceuticals, shoes and cigarettes has become mandatory from July 1, 2020. This will apply to perfumes, eau de toilettes and photo products from October 1, 2020, to tyres – from January 1, to consumer goods – from January 1. Besides, labelling of bottled water and dairy products is being tested now.

Taking into account the new requirements, Ivan Samusev, the Commercial Director of TELS Group, tells about the options for the merchants to import goods to Russia.

It is quite simple for an economic agent to register and receive the codes in the Chestny Znak system – this is mainly about the operations in the information system. Yet the most important and time-consuming stage is the application of the codes to the product. It is important to do everything correctly here, as any mistake is most likely to result in negative consequences or possible losses for the business.

Generally speaking, an importer has three options to ensure the import of labeled products.

OPTION ONE: import the products labelled by the manufacturer

In this case, the importing company has to “persuade” the supplier to organize the labelling of goods in their warehouses before the shipment (this requires additional financial, human and other resources).

But the scheme has the following risks:

• A manufacturer may refuse to label the goods if the share of exports to the Russian Federation is insignificant or low-margin.
• Manufacturer's errors in labelling or preparing consignments remains importer’s responsibility even if the manufacturer agrees to label their production.

What are the consequences of an error? Imagine the following situation: the cargo has arrived to the temporary storage warehouse and the error is discovered during customs clearance. The Federal Customs Service cannot release such a cargo for free circulation, and in most cases the importer will not be able to correct the error at the customs warehouse or it will be very difficult. The importer will not be able to take the goods back until the investigation procedure of the administrative case is over, which can take up to 2 months.

And what is next? Returning the cargo to the supplier? Relabelling the goods on your own? Where then? There are many issues with no clear answers and no solution algorithm.

OPTION TWO: the importer organizes the application of the codes at the customs warehouse before customs clearance

This is possible but not at all customs warehouses. For a quality solution, the warehouse should have:

• A separate area with equipped workplaces. Many small goods have a high value, so to ensure their safety, labelling should be carried out in an isolated area with an organized access control system, video monitoring, etc
• Well-tuned IT infrastructure (printers, scanners, software).
• A team of skilled workers.
• Possibility to regulate the size of the work team depending on the volume of goods and labelling timeframe.

The following restrictions at the customs warehouses may occur:

• Insufficient number of suitable warehouse areas.
• Limited possibilities to organize the process properly (concerning the equipment of workplaces, staff training, regulation of the size of work teams, etc.).
• Problems with the release of goods for free circulation if errors are found.

If importers (cargo owners) want to rely on this option to organize the labelling of goods, they should be ready for the following:

1. Maintaining customs warehouses implies financial and time expenditures.
2. The existing customs warehouses require expansion and modernization, which is often complicated by the existing infrastructure ensuring security and access control.
3. The cost of products will increase after long-term storage at customs warehouses arisen due to noncompliance (misgrading, errors in shipping documents).

OPTION THREE: application of Honest Znak codes by logistics contractors at warehouses outside the Russian Federation

According to preliminary estimates, this is the most convenient option for importers allowing to adapt to changes quickly without a significant loss of time and money.

Logistics contractors are highly motivated to do the task well as in case of a mistake, they will suffer as well. When labelling the goods, they will certainly check the compliance of the declared lists of goods with the real ones and together with the cargo owner they can bring changes to the shipping documents or change the size of shipment. This means that the cargo will arrive at the customs warehouse with the correct documents fully corresponding to the cargo and accurately labelled.

Below are some important criteria that can be used as a kind of checklist to choose a logistics contractor:

• Real experience in labelling goods with Data Matrix codes.
• Compliance of operator’s warehouse with the conditions for the storage of goods.
• Alternative delivery schemes involving warehouses for labelling.
• Ability to label the required volumes of goods within the required timeframe.
• Capability for collaborative planning.

The contractor should have enough workers and technical resources to accelerate the labelling processes without significant increase in costs and within the agreed timeframe.

For example, a team of three people for two workplaces labels one truck of shoes per day. If we plan the volume and time of shipments with the customer in advance, we can regulate the number of employees involved to accelerate cargo handling. Obviously, the larger the size of cargo and the more regular the supply of goods are, the more opportunities there are to streamline the process and reduce the labelling costs.