Summary
The border controls arising from the basis of the UK’s departure from the EU customs union and single market is profoundly disrupting the re-export of ACP fresh products to Ireland. While larger ACP exporters are able to adjust their routes to Irish markets to side-step the new border complications, smaller ACP exporters are simply losing orders. There are simple policy solutions which could be adopted to address the rules of origin/MFN tariff and phytosanitary complications now faced. Adopting such solutions is not only important in its own right but would offer a model for addressing the far more extensive disruptions to re-exports of ACP products to the UK which are likely to arise as full UK full border controls on good crossing from the EU are rolled out in 2022.
Amid a general decline in UK exports to Ireland, which in the first quarter of 2021 saw over a 70% year on year decline (1), re-exports of ACP fresh produce from the UK to the Republic of Ireland are also being adversely affected. Politico reports ‘fruit and vegetable sellers in Britain are seeing their business with Ireland dry up’, particularly where this involves re-exports (2).
According to one British importer (which imports exotic and tropical fruit and vegetables, specialty chillies, fine beans and herbs and ingredients from 3 African countries as well as producers in Latin America and Spain), commercial dealings with some partners in Ireland have had to be abandoned. This included a supply arrangement with a turnover of £2 million, after ‘three deliveries in January faced a £4,000 duty bill — about 25 percent of the value of goods.’ The tariffs on the re-exported products concerned were described as ‘substantial’, with Irish customers being unwilling to bear the costs (2) (see table for details of the range of applicable tariffs).
elected Applicable EU Tariff Range on UK Re-Exports of ACP Products to Ireland
| 10%+ | 5%-10% | Zero |
| Fine beans | Fresh Peas | Mangoes° |
| Limes° | Broccoli | Mangosteen° |
| Peas | Sweet Pepper | Guava° |
| Okra | Pepper’s capsicum | Passion fruit° |
| Coriander leaves | Fennel | Pitahaya |
| Sweet potatoes | Persimmon | Papaya |
| Oranges° | coconuts | |
| Fresh pomelos | ||
| Note: ° indicates product where UK and EU import requirements for phytosanitary certification diverge and UK to EU cross border trade has been made impractical. | ||
In addition, UK and EU phytosanitary certification requirements for imports have begun to diverge. The UK has removed phytosanitary certification requirements for a number of products, where EU phytosanitary certification requirements for imports remain in place. If no phytosanitary certificate accompanies the initial imports into the UK, there is no basis for issuing a UK phytosanitary re-export certificate. Without such phytosanitary certification, the re-export of these products to the EU (including to Ireland) is simply not allowed. This not only further complicates onward trade in products which already face high MFN tariffs if onward shipped outside of customs supervision (e.g., citrus products), but also halts the onward trade in products where no MFN tariffs would apply (e.g., mangos, guavas, and passionfruit).
This issue of the adverse impact of the new UK/EU trade arrangement on developing countries was raised in parliament by Lord Purvis. However, reportedly, the issue was summarily dismissed by UK government Ministers (2).
This is giving rise to a general feeling the operational aspects of the consequences of the basis of the UK’s withdrawal from the EU customs union and single market are sitting uneasily with UK governments’ stated policy commitments. UK importers have highlighted the UK government’s commitments to producing and transporting food cost-effectively and sustainably, yet the new arrangements are generating such delays (up to 5 days for the issuing of a UK re-export phytosanitary certificate) that short shelf-life perishable products are spoiling and having to be dumped. The reality faced is seen as being far from the frictionless free movement of goods the UK government held out as the outcome of the new UK/EU trade agreement (2).
Meanwhile in March 2021, while a spokesperson for the Department for the Environment, Food and Rural Affairs (Defra) acknowledged ‘some businesses are facing issues related to goods losing their eligibility for preference under new trade rules’ and claims were made the government was ‘working hard to ensure trade continues to flow smoothly’, the response to date has been inadequate (2).
UK officials have pointed out how ‘goods can maintain their status if theyʼre kept under customs control and not put into free circulation in the U.K. before re-export.’ However, this sits uneasily with the pre-existing business model used by UK traders, who compile consignments for customers in Ireland in light of evolving demand in GB and Ireland.
The fact that in macro-economic terms ‘the majority of trade is unaffected by this issue’ (2), does nothing to remove the harmful effects being felt by producers from some of the least developed countries in Africa whose exports to the UK have in part previously been re-exported to Ireland. Against this background, a reorientation of Irish sourcing is underway.
For example, Kenyan exporters have already made what are seen essential adjustment, by rejigging their supply chains to ‘bypass the U.K. completely’. This involves shifting over to initial ports of landing in France close to the expanded ferry services now directly sailing to the Republic of Ireland. This fundamental re-routing adjustment is seen as necessary given the ‘systemic’ nature of the issues faced as a result of the terms of the EU/UK TCA (2).
This process of rejigging routes to markets is likely to carry profound implications for individual UK importers and their African suppliers. This is likely to impact smaller scale African exporters most severely, with larger scale African exporters, who already supply both UK and EU markets (such as Kenya), being better placed to restructure their supply chains serving Irish markets through the routing of cargoes via mainland EU ports of entry.
Unless policy initiatives are taken to elaborate the EU/UK TCA, so as to address the multiple challenges facing the UK to Ireland re-export trade, the reorientation of supply chains serving Irish markets to avoid the UK will become a permanent feature, to the disadvantage of smaller ACP exporters.
| Comment and Analysis
The UK to Ireland re-export trade in ACP fresh produce is particularly sensitive to Brexit related disruptions because of the high level of integration of Irish wholesalers and retailers with UK based supply chains. This is compounded by the high level of EU tariff protection for many of these fresh fruit products and the divergence in UK and EU phytosanitary import control requirements which is underway. In addition, the rapid expansion in alternative routes to Irish markets from mainland EU ports which has occurred since January 2021 (a more than tripling of services), is radically transforming the commercial possibilities available for serving Irish markets via initial ports of landing in the EU. The imbalance in Irish export and import trade in food products along these ferry routes, further increases commercial possibilities for direct onward shipment of ACP cargoes from the mainland EU to Ireland. Against this background, if UK importers and smaller ACP exporters are not to be permanently disadvantaged, it would appear important for the UK government to seize some of the low hanging fruit, in terms of policy initiatives aimed at removing some of the barriers which have emerged to the UK-Ireland re-export trade. While the UK governments has emphasised the need for imports to remain under customs supervision when destined for re-export, this is simply not possible given both the current trading models being used and the infrastructure, IT, and human resource constraints faced in cost effectively accessing Common Transit Convention processes. Against this background, alternative options for avoiding the reimposition of standard MFN tariffs on fresh produce, which enjoy duty-free/quota-free access to both the UK and EU market when exported directly, need to be found. A number of options exist in this regard. Firstly, on development policy grounds, the UK government could seek agreement with the EU to a parallel modification of the ‘direct transport’ provisions of the rules of origin annexes included in the various EU EPAs and UK Continuity Agreements. Such modifications would grant the retention of initial ‘originating status’ for all products which enjoy duty free/quota free access to both the EU and UK market, even when such products are shipped along triangular supply chains outside of customs supervision. While clearly, such arrangements would need to be supported by verifiable documentary evidence of country of origin, specific evidentiary arrangements could be developed on a product-by-product basis, linked to other authenticated trade documentation commonly in use. Such an arrangement would pose no risk of trade diversion or distortion and would be an effective response to the increasingly difficult logistical realities facing developing country exporters as a result of the impact of the Covid-19 pandemic on the price and accessibility of both air freight and sea freight services. The second option would be specific to fresh fruit and vegetables. For all but a handful of fresh fruit and vegetable products, officially authenticated country of origin phytosanitary certificates have to accompany imports. Given the authenticity of this country-of-origin specific documentation is recognised by the importing authorities for plant health purposes, there would appear to be no reason why it should not be accorded official recognition by national customs authorities when determining eligibility for the tariff preferences which exporters from the country of origin enjoy under trade agreements. This simple change, mutually agreed between the EU and UK authorities, would remove the tariffs currently being levied on re-exports of ACP goods shipped to Ireland via the UK and would avert similar problems along much larger ACP-to-EU-to-UK supply chains. Problems which are only likely to get worse in 2022, as the UK ‘rolls out’ full border controls on goods crossing over from the EU. The second major area of concern which is generating extra costs and expensive delays (resulting in increased product wastage), relates to new phytosanitary controls on products crossing over from the UK. With the exception of a handful of products (banana, coconuts, dates, durian, pineapples) phytosanitary re-export certificates, accompanied by the original phytosanitary certificate which was used for entry to the UK, are now required for fresh fruit and vegetable re-exports from the UK to Ireland. However, there is considerable confusion over the process for issuing re-export certificates and unrealistic timeframes for their issuing where short shelf-life products are concerned. Urgent action is required to address this phytosanitary re-export certificate issue, involving: a) The publication of clear guidance on the circumstances under which a b) The clear designation of the officials responsible for dealing with the issuing of c) A clear elaboration of the expedited procedures to be followed for the issuing of d) A clear specification of the fee schedule to be applied to the re-issuing process, While it is important is that the UK government take unilateral action where possible. However, consultation with the national authorities in EU member states most concerned with EU/UK trade would appear essential if the current problems faced along ACP-to-UK-to-EU supply chains are not to be replicated, in far more extensive form, along ACP-to-EU-to-UK supply chains in 2022, when the UK rolls out full border controls on imports crossing over from the EU (including ACP re-exports of fresh produce). The problem of those products where EU and UK import requirements for phytosanitary certification now diverge (Kiwi, Citrus, Kumquat, Bitter orange, Persimmon, Cotton (bolls), Curry leaves, Mango, Passionfruit, Guava) needs to be addressed at two levels. Firstly, in the country of export, with phytosanitary certificates being issued for products destined for the UK, where re-exports are likely, even when such certificates are no longer required for entry to the UK market. Secondly, at the level of the UK authorities, who will need to accept the issuing of phytosanitary re-export certificates, even for products where phytosanitary certificates are no longer a requirement for entry to the UK. Policy initiatives in these two areas will reduce, but not eliminate new trade administration and border clearance requirements. For costs and delays in these areas to be further reduced initiatives, such as those launched by the Irish Department of Agriculture to explore how border checks on food can be eased within the framework of the EU-UK TCA, will need to gain traction. Unfortunately, as the House Lords European Union Committee report of the 24 March 2021 observed, any relaxation of border controls is unlikely, so long as the ‘UK keeps open the option of regulatory divergence on food standards’ (3). Equally, while the two proposed areas for policy initiatives would reduce complications which are driving a rapid escalation of road haulage costs for onward shipped cargoes which need to cross and EU/UK border, it will not fully address the source of logistical cost increases. This lies in the virtual abandonment of ‘groupage’ road haulage practices in cross border EU/UK trade. For this ‘groupage’ issue to be addressed further initiatives are required which lead to the establishment of officially recognised groupage hubs. Such groupage hubs would prepare ‘groupage’ cargoes for border clearance processes, with this preparation being reflected in expedited border clearance arrangements for such cargoes. Private sector associations in close cooperation with international freight companies (notably in the fisheries sector), as well as the UK government, have already launched pilot initiatives. At the government level this includes the ‘Groupage Export Facilitation Scheme’ (GEFS), being piloted in mainland UK to Northern Ireland trade. A combination of this private sector and government experience could potentially provide a way forward in dealing with ‘groupage’ issues in UK trade with the Republic of Ireland. This could benefit the re-export trade in ACP horticultural products if new tariff and phytosanitary complications can be addressed at the policy level. Such policy initiatives to address issues in UK to Ireland trade are urgently needed, since it could provide a model for addressing issues along ACP-to-EU-to-UK supply chains. These supply chains involve a much higher volume of ACP re-exports in a context where the whole range of existing complications along ACP-to-UK-to-Ireland supply chains are likely to be replicated as full UK border controls on goods crossing from the EU are rolled out in 2022. |
| A special two-part feature on UK-Ireland trade post-Brexit and its impact on ACP agri-food re-exports to Ireland will be posted shortly. |
Sources:
(1) The Guardian, ‘British food and drink exports to EU fall by £2bn in first quarter of 2021’, 18 June 2021
https://www.theguardian.com/business/2021/jun/18/british-food-and-drink-exports-to-eu-fall-by-2bn-in-first-quarter-of-2021
(2) Politico.eu, ‘UK fruit and veg exporters ditching Ireland as Brexit tariffs hit’, 19 March 2021
(3) House of Lords, European Union Committee report, ‘Beyond Brexit: Trade in Goods Paper 249, 25 March 2021
https://publications.parliament.uk/pa/ld5801/ldselect/ldeucom/249/249.pdf