Brexit Costs Are Leading to a Restructuring of UK to EU Supply Chains

While these additional costs generated by the new UK to EU trade realities are relatively minor for a retail giant such as M&S, when it comes to the challenges faced in the re-export of developing country products multiple retailers such as M&S still try to pass on all additional costs to their developing country suppliers.

While in terms of UK exports the worst affected products are seen as being livestock products, for ACP exporters using triangular supply chains, particular problems arise for fruit and vegetable exports. This is a result of the absence of a comprehensive EU/UK cooperation agreement on phytosanitary import controls and mutual recognition of agri-food standards.

These phytosanitary related complications take three distinct forms:

· The new requirements for phytosanitary re-export certificates for ACP agricultural products imported to the UK prior to onward shipment to EUI27 markets (most notably but by no means exclusively to the Republic of Ireland).

· The complications arising from the divergence in UK and EU phytosanitary certification requirements.

· The need for phytosanitary import checks upon entry to the EU when imported ACP products are re-exported from the UK to the EU.

None of these costs increasing requirements were faced prior to 1 January 2021 but are now faced on agricultural products entering the EU market except, bananas, coconuts, dates, durian, pineapples.

In terms of the issuing of phytosanitary re-export certificates there is some confusion over when these are required, the procedures for issuing such re-export certificates and the service fees to be charged by government inspection services.

There would appear to be a need for the UK government to clarify this situation. Specifically, through:

a) The publication of clear guidance on the circumstances under which phytosanitary
re-export certification is required; experience to date suggests close consultations
between UK and national EU27 customs administrations in the principal countries of
entry to the EU will be required in drawing up this guidance.

b) The clear designation of the UK officials responsible for dealing with the issuing
of phytosanitary re-export certificates.

c) A clear elaboration of the expedited procedures to be followed for the issuing of
phytosanitary re-export certificates.

d) The clear specification of the fee schedule to be applied to the re-issuing process,
with fees being waived if agreed timeframes for re-issuing are not met.

It would appear important to make early progress in regard to ACP-to-UK-to-EU re-exports, so such procedures can then be used as a model for handling phytosanitary issues in the ACP-to-EU-to-UK re-export trade, where a far greater volume of trade is involved. This is likely to be particular problematical if each concerned EU national customs administration unilaterally determines its own processes for dealing with re-exports along ACP-to-EU-to-UK supply chains.

In terms of complications arising from the divergence in UK and EU phytosanitary certification requirements, there are now a number of products where phytosanitary certificates are no longer required for exports to the UK but are still required to be allowed entry to the EU market. These products include kiwi, citrus, kumquat, bitter orange, persimmon, cotton (bolls), curry leaves, mango, passionfruit, and guava.

Currently all products subject to phytosanitary certification requirements shipped onward from the UK to the EU need a phytosanitary re-export certificate issued by the UK authorities. The issuing of this phytosanitary re-export certificate is based on the initial phytosanitary certificates issued by the authorised body in the country of production.

If no such initial phytosanitary certificate accompanies exports to the UK, then re-export certificates cannot be issued. Without a phytosanitary re-export certificate, accompanied by the original phytosanitary certificate from the country of production these products will be denied entry to the EU market, including the Republic of Ireland and in due course Northern Ireland.

For the main products categories affected (citrus, plantains, mangoes, and guava), this re-export trade from the UK to the EU was valued at €60.7 million in 2019 and €71.6 million in 2020.  If we consider the top 8 traded products where the UK no longer requires a phytosanitary certificate, but the EU still does, the total value of trade was €70.7 million in 2019 and €81 million in 2020.  While it is unclear what % of these re-exports originate in ACP countries, a number of these products are amongst the top ten ACP fruit and vegetable exports (notably citrus, and mangoes).

The simplest means of avoiding a block on onward trade in these products where EU and UK phytosanitary certification requirements now diverge is to ensure a phytosanitary certificate issues by the designated authority in the country of production accompanies the initial exports to the UK, if onward trade to the EU is planned or likely. This issue will need to be taken up and addressed with the national authorising body.

Alternatively, the concerned ACP exporters will need to restructure their routes to market to avoid crossing a UK/EU border when serving EU markets.

UK Exports to the EU in Products Where Phytosanitary Certification Requirements Diverge (2019 and 2020)

In terms of phytosanitary import checks, a recent case of a lack of common understanding between UK and French customs officials over the circumstances in which a phytosanitary re-export certificate is needed and the precise form required resulted in an almost 10-week delay in the delivery of a cargo of dasheen (taro) from the Caribbean to customers in France via the UK.

This delay incurred substantial additional storage costs in the UK and involved a loss of value on the final sale price, which had to be borne by the smaller holder producers in the Caribbean, who has supplied the product for export.

Serious questions arise as to whether having experienced such delays and value losses, Caribbean exporters of dasheen/taro will continue to export to France via the UK and whether, given shipping line schedule constraints, they will be able to restructure their routes to directly serve French markets.

If widely replicated, these kinds of phytosanitary-based border clearance incidents, are likely to rapidly drive ACP smallholder producers out of export supply chains involving the crossing of an UK/EU border.  This kind of issue could become particularly serious once the UK introduces full border controls on goods crossing from the EU, given the higher volume of trade carried along ACP-to-EU-to-UK supply chains.

As a consequence, it is important that practical solutions are found to these challenges along ACP-to-UK-to-EU supply chains in the coming months since this could offer a model for dealing with these same issues along ACP-to-EU-to-UK supply chains. This issue could usefully be taken up in a coordinated manner by the government of the concerned countries, with both the UK and EU authorities.